Bahrain Residential MarketView

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Overview
 
The global credit crunch has affected all real estate markets in the region to a greater or lesser extent. Dubai has been the most high profile causality of loss in confidence and liquidity but other markets have suffered too.
 
The Bahrain government has announced plans to build 43,000 homes by 2014 and it would appear that the impact has been less severe there, but it is important to note that there are a number of reasons for this.
 
Investor Behaviour

• The market is far less transparent and transaction activity is neither fully recorded or reported (separating fact from fiction is very difficult);


• The level of transaction activity is very low and it is difficult to draw too many conclusions from the sporadic sales being made;


• Bahrain did not experience the same level of investor/speculator activity as other regional centres such as Dubai;


• Expatriates in Bahrain are typically more focused on saving than spending and were less likely to buy property in the first place;


• The variety and pricing of mortgage products in Bahrain is both small and expensive – something of a disincentive to potential buyers.

 
Housing Deficit
The greatest pressure for housing is in the low-income and social housing sectors, with private sector developers claiming that the Kingdom needs 80,000 social housing units by 2020.
 

• The number of professional expatriates who have lost their jobs in Bahrain has not been fully quantified but has been sufficient to take much of the pressure off rental accommodation supply.


• Similar to Dubai, it was this growing pressure on available rental accommodation and its pricing that was starting to drive premium property prices.


• Rental accommodation pressure has now eased, such accommodation is vacant and rental rates have stabilised.


• Off-plan sales have virtually dried-up as potential buyers wait for some indication that the market has “troughed”.

 
Developer Activity
 

• Pulling their marketing campaigns until market confidence returns;


• Delaying development programmes to extend delivery dates and ease cash flow pressures;


• Converting saleable properties into rental properties.

Impact of Rental Rate Pressure
 
 
The above chart details the rise in rental rates in Bahrain between 2003 and 2009, but despite this, the pressure on income to cover housing costs remain relatively low compared to other regional centres.
 
The following table provides an indication of the relative portion of salaries consumed by housing costs throughout the region in 2008.
 
 
It is no coincidence that the markets experiencing the most upward rental rate pressure were in the UAE and Qatar, while those experiencing the least rental rate pressure were Bahrain and Saudi Arabia.

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