Thursday 25 / April / 2024
Muscat: Isaaq, owner of a leading real estate company in Oman, said the lower occupancy rate has forced him to decrease the amount of rent being charged this year. “There is a big drop in demand for residential and industrial rental. We had to slash rents by nearly 30 per cent to match consumer demand this year,” he said.
Read here: Residential rents dip by 8% in Oman this year
Um Tariq, an apartment owner, said that profits from rentals will be affected if she lowers her rental price much further.
“I used to rent out my apartments for OMR500 per month, but because of crunch I lowered it to OMR400, then again until it is now OMR 325. I couldn’t go any lower or else I’ll lose out on my profits,” she explained, citing the high cost of maintenance and utilities.
“The rent being reduced is very good because business has been slow for a while now. If rents go down, it means people have more money to spend on purchases,” said Manoj, a resident and small business owner.
Big impact in Qurum
“A while ago they increased rents by 30 per cent , and that had a big impact on business in Qurum. At least 12 shops in the area had to close because they were not making enough money. With rents decreasing, people will have more money with which they can buy things, and that will be good for everyone,” noted Dilshan, a shoe store manager.
“The shop next to mine went out of business last Ramadan and the owner had to sell it for half of what he bought it for. With rents going down it will be good for us because business has been pretty bad, and we’ll look forward to new customers,” said Taj, a clothes store proprietor.
“This is actually very good for us because if rents are lowered, more people will come to Qurum and that means businesses here will pick up. Because of all the big malls opening in Seeb and Al Khuwair, businesses here have been forced to shut shop,” says Prasad, a resident.
“If rents are lowered how will property owners and developers make money to pay salaries? There are times when cash flows are affected these days and this will only make things worse,” said Mohammed Ghouse, a coffee house manager.
One owner of several apartments in the Qurum area of the city added, “I have dropped from OMR500 a month to OMR400 a month because, otherwise, nobody will come. It’s the same for villas we own and apartments. There has been a drop in orders to get people to move in.”
An owner in Al Hail observed, “Last year we were renting our penthouse at OMR850 a month. Now we get OMR500 for the same place, one year on. It’s difficult for people who bought these properties as investments to go any lower.”
Durrani added, “More positively, the government is clearly working hard behind the scenes to drive more efficient spending, while at the same time undertaking sentiment boosting mega projects, such as the recent tendering for the first phase of Oman Rail and the progression of works related to the USD 1.3 billion redevelopment of Mina Sultan Qaboos. Projects such as these bode well for future demand for residential property, but for now, the outlook remains subdued.
“The findings suggest that demand for newer A grade quality residential properties is high in Oman. The properties in Qurum are old and there is less supply of quality homes, therefore less demand. Apartments and villas at Al Mouj, on the other hand, are more lucrative, considering the drop in rents and high quality,” said Philip Paul, Head of Cluttons Oman.
The fall in rental rates is attributed to the economic slowdown in the country, following a decline in oil prices by 60% since July 2014, which has, in turn, seen organisations shedding staff in large numbers. “There is clearly an oversupply of rental spaces in Oman due to a large number of expats leaving, following nearly two years of low oil prices,” a spokesman added.
Philip Paul added that occupancy rates at large residential properties had fallen from 98% in 2015 to 90% in 2016.
“We have seen a significant market correction this year, with rents falling 10-15%, and we predict the softening of rental prices to continue with a drop of 5-10% next year. The trend among tenants is to shift to better quality homes as landlords are expected to offer incentives, along with lower rental rates in larger residential complexes, and it will continue in 2017,” the report stated.
