Muscat: There has never been a better time to rent a home in Oman, after a new report reveals monthly rents have dropped by as much as 25 per cent in the last three years.
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Residents, however, have been slow to take advantage of the dip and take the plunge to move home, according to the Winter 2017/18 Property Market Outlook by real estate agency Cluttons.
A number of key factors in Oman next year should see the Sultanate turn the corner economically and rent levels will start to rise again from 2019, the report states.
That means residents need to cash in now if they want to bag a bargain on the homes front, experts say.
Estimated GDP growth of 5.2 per cent, gas from the recently completed Khazzan field and the opening of the new airport should all contribute to make 2018 the year with the strongest rate of expansion since 2015, according to estate agents.
That in turn should help to bolster the property market, Cluttons believes.
Ian Gladwin, Head of Cluttons Oman, said: “Average rents in Muscat are now generally 20 per cent to 25 per cent lower than they were during Q3 2014, right before oil prices plunged from highs of close to $110 per barrel, highlighting how intrinsically intertwined Oman’s economy and property markets are with the performance of oil prices.”
Faisal Durrani, Head of Research at Cluttons, said: “Our analysis shows that the premium residential locations across the city have seen the largest drops in rental values as tenant demand has increasingly focused on more affordable locations and properties. Al Mouj and Muscat Hills for instance, have experienced rental corrections of up to 10 per cent over the last 12 months.”
Average rents currently sit around OMR690 per month, down OMR5 per month on Q3 2016, according to the Cluttons report.
Durrani added: “Given the current market dynamics, we believe the residential rental market in Muscat is likely to remain relatively stable for the remainder of 2017 with rents, on average, likely to end the year only marginally down on 2016. We expect rents to stabilise over 2018 with the potential for only limited further downward corrections. However, we do not see any realistic prospect of rental value increases until at least 2019. As for the office market, our view for 2017 is for relative stability with the potential for limited further reductions.”
Other real estate agents also agreed that things may brighten up next year. “Yes, we are optimistic that the rental scenario will improve in 2018 as Oman’s GDP is also likely to rise in 2018. Once the GDP rises more jobs will be created and more demand for housing will be there,” said Sudhakar Reddy, CEO, Al Habib & Co LLC, said. “We are not in a position to bargain at all this year with so many properties lying vacant,” a manager of a reputed rental agency said, adding: “We are hoping that 2018 will be better than the last two years as more jobs will be created.”
Madhu GN, VP Strategy at Al Siraj Holding, said: “The austerity measures have been working in Oman’s favour and we expect growth by mid next year. In terms of real estate market, we firstly need integrated housing communities. So instead of a building or two for residents owners must focus on building a community. We can see several communities in Muscat where rents haven’t dropped although they are being rented at a premium. So it is all about what people want. We will expect more developments around the airport like accommodation, entertainment facilities.”
This month, the Property Report of Al Habib, said rents have dropped by as much as 32.49 percent in some parts of Muscat in 2017. “There is too much construction which is happening and that is one of the reasons the rents are dipping. Just to give you an idea, the average number of villas built in Muscat between 2003 and 2010 was around 3,000. But in 2016, around 9,000 villa building permits have been issued,” Reddy had said after releasing the report.
“Although we expected landlords to offer greater flexibility due to the stagnant market conditions, this has failed to materialise en masse. In contrast, absorption has been reasonably strong for recently completed, higher quality developments where landlords have taken a more proactive approach to attracting tenants, particularly in terms of offering competitive rental rates,” said Ian Gladwin, Head of Cluttons Oman. The ‘Smart city’ of Duqm, coupled with Chinese investment and a new business park creating 4,000 new jobs, will also help spur the recovery, according to the report.
Oman’s economy, like many of if its Gulf neighbours, is still working its way through a challenging period, triggered by the shock collapse in oil prices in 2014. The country, however, is embarking on a journey to wean itself off its dependence on oil revenues through diversification efforts and positive government intervention, the report states.
Gladwin added: “Although the real estate market has been impacted by a reduction in overall demand, there remain pockets of activity and clear opportunities in both the residential and commercial sectors.
“Primary drivers of these opportunities include major projects such as the Khazzan gas field project and the new airport in Muscat. The airport, which will nearly double passenger capacity to 12 million passengers per annum, is expected to boost the country’s tourism and hospitality sector, while also opening new development opportunities for land parcels around the airport.”
Some residents are, however, cashing in on the situation. Some are moving home to better homes or some are moving nearer schools and offices so that they save on transport money. “I moved closer to my son’s school and that helped me in two ways. First I managed to save some money on rent and then I managed to save money on transport,” Kishore, an Indian expat said.
“I just changed my villa which is a few hundred metres from the old villa in Seeb and managed to save some money on rent as my old house owner was not willing to reduce my rent,” said another resident.