Bahrain's residential lettings market is expected to experience a surge in supply during the second and third quarters this year, according to a report by Cluttons, a leading real estate specialist.

The research sees several major residential developments being brought to market, including the government's housing programme, according to a report in the Gulf Daily News, our sister publication.

It is estimated that over 6,000 government-built homes will be completed by the end of the third quarter, helping to relieve some of the pressure off the waiting list which, according to Cluttons' research, has received almost 54,000 requests.

Despite perceptions that the sharp upturn in residential supply may place downward pressure on prevailing rents, analysis suggests that rents will remain stable, Cluttons said in its country market report for the first quarter.

This is due to there being sufficient domestic demand to absorb the new residential units, coming predominantly from the US Navy, which continues to relocate personnel to the kingdom.

Tenant demands are centred on the quality of finishing, with a preference for furnished properties and modern amenities topping the wish lists.

The residential sales sector is seeing an increase in foreign investment from the GCC, which perceives the market to have 'bottomed out.'

This renewed interest in investing in property in Bahrain has created a window of opportunity for some landlords to exit investments made at the peak of the market, with manageable losses.

Following a low level of activity in the commercial sector in the fourth quarter of last year, this year has got off to a significantly better start, with an increase in occupier enquiries, predominantly from companies expanding and requiring new space, rather than new entrants to the market.

Landlords remain under pressure to remain flexible on the lengths of rent-free and fit-out periods given the oversupply in the office market. Therefore Cluttons is not anticipating any significant upturn in office rental rates in the medium- to long-term.

The industrial market has seen a slight upturn in performance, although this is underpinned by a lack of stock, rather than an increase in requirements.

The low supply levels are translating into increased landlord negotiations, as they are aware of market conditions and are trying to maximise potential returns.

Despite this, rents are expected to remain stable between BD2 ($5.27) and BD3.5 per sq m this year, a figure that remains unchanged from the second half of last year.

New supply is expected to come to market during the summer, which will help satisfy some of the demand.

The rising demand for plots of land has led to a gradual increase in freehold and leasehold values. – TradeArabia News Service