Bahrain’s current economic stability has begun to impact on residential rents, by stabilising rates and encouraging tenants to turn their attention to higher quality schemes, according to the latest report from leading international real estate consultancy, Cluttons.

An increased focus on higher quality developments will begin to put rents under strain at the top end of the market, stated Cluttons in its winter outlook for Bahrain's residential property market.

In turn, it is anticipated that asking rates for such properties will start to nudge upwards over the course of the next six months, as the national stability beds in more widely across the kingdom, driving more rigorous economic activity and therefore, job creation levels, it stated.

"A number of high quality projects are already experiencing increased interest. At the Kazerooni Homes development in Saar for instance, the semi-furnished four-bedroom villas are letting for around BD1,800 ($4,746) per month," noted Harry Goodson-Wickes, the head of Cluttons Bahrain.

"Tenants are drawn towards these sorts of top-tier schemes by the perceived high quality finishing and relative affordability of rents," he stated.

According to Cluttons, the proximity to schools has been a particularly strong driver for the relocation of existing tenants, with families seeking out accommodation within easy access to Manama’s main schools.

While this trend is common globally, it has re-emerged in the kingdom as confidence and stability return, with households targeting school districts in increasing numbers.

Saar has been a key beneficiary of this trend, which has been further amplified by the receding of localised disturbances in this area, said the report.

The property expert pointed out that economic diversification in Bahrain would bring a wider range of tenants to the kingdom.

The residential market’s dependency on the regular rotation of US Navy personnel is now starting to be complemented by the slight upturn in tenant demand from the education, law and banking, and financial services sectors, with many tenants new to the kingdom, it added.

"Over the medium to long term, we expect to see an even wider range of tenant requirements, as other sectors of the economy gradually return to growth, creating new jobs and therefore households," observed Goodson-Wickes.

"We have already seen Bahrain’s non-oil sector experience 2.3 per cent growth during the first quarter, while the government continues its infrastructure investment programme, with funding for projects increasing by 2.4 per cent compared to the first quarter, which in macro terms has translated into rising business activity levels," he noted.

"The real estate sector has and continues to clearly benefit from this," he added.

According to Cluttons, rents across Manama have held steady, over the course of the year, with no change being recorded through the first three quarters. In fact, rents now stand just 0.8 per cent ahead of this time last year, the lowest rate of annual growth since the fourth quarter of 2011, when rents slipped by -0.2 per cent.

The report also reveals that during the third quarter, villas on the Amwaj Islands remained the most expensive in the kingdom, commanding average monthly rents of BD1,275 ($3361), while apartments in Al Seef remained amongst the most competitively priced, with asking rental rates hovering around BD700 ($1,845) per month.

In general, one bedroom apartments in Al Juffair, Al Seef, Reef Island and on the Amwaj Islands retained their position at BD550 ($1,450) per month as the most affordable type of accommodation during the third quarter.

"There is a definite gap in the Bahraini residential landscape for the development of a deeper and more widespread affordable housing programme to support and deliver the National Housing Plan," stated Goodson-Wickes.

"We expect Eskan Properties’ Danat Al Madina development at Isa Town to be particularly popular for this reason. We also anticipate a significant interest from developers in this area going forward," he added.-TradeArabia News Service