10-15% drop in property rent this year
October 17, 2019 | 4:40 PM
by Times News Service
Times File Picture.

Muscat: Rent of properties in Oman have declined by about 10 to 15 per cent in 2019 compared to 2018, according to realty firm, Al Habib & Co.

The company attributed this slump to declining number of white collar expatriate employees.

Al Habib said: “The real estate market continues to be soft with further decline in rents and property prices. This is mainly due to belt tightening by the government as it mends public finances by shrinking the budget deficit.”

“For H1 2019, government revenues were up to OMR5,514 million compared to OMR4,948 million in H1 2018. However expenditure was down from OMR6,353 million to OMR6,175 million in the same period, with the deficit shrinking from OMR1,405 million to OMR660 million. As government spending is one of the main drivers of the economy, reduction in spending is leading to overall softness in the economy.”

It added: “It is hard to predict oil prices, but the consensus is that prices will stay low for some time. Austerity is here to stay for a few years. However, there is considerable progress in economic diversification, although, it will take a few years for the non-oil component of the economy to make up for lower oil revenues.”

It explained that the owners — who have been quick to adjust the asking rent — maintain the buildings in good condition and offer good maintenance services, are enjoying higher occupancies rather than those who are less flexible on rent and who do not maintain their buildings well.

Demand for real estate is driven by the job market and it is important to track the job market to understand the real estate market.

The total number of expat employees in the private sector has gone down from 1,787,447 as on 31 December, 2018 to 1,745,683 as on 31 July, 2019 a decrease of 41,764 (2.33 per cent). The number of expats who hold a diploma and above has gone down, in the last two and half years, from 159,506 to 138,504 a decline of 21,002 (13.17 per cent).

Companies in the private sector are cutting down on manpower costs, to cope with shrinking margins. The continuing decline in well-educated expatriate numbers is putting a lot of pressure on rents and occupancies in investment properties.

In most cases, enquiries are not from newly arriving expatriates but from those already in Oman, seeking to move to cheaper or better accommodation. In some cases, expatriate employees are sending back their families and moving to smaller or shared accommodation, owing to job uncertainty. In real estate, supply growth can be arrested but the actual availability itself can not be reduced.

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