A new report says there are no signs that Qatar’s red-hot real estate market will cool in the coming months as rents increase at the fastest pace in six years.
In a recent economic commentary report, Qatar National Bank Group said residential rents rose 7.9 percent year-over-year in August.
The report cited robust economic growth as the main reason, as Qatar’s many development projects are bringing more people to the country and increasing the incomes of existing residents.
The growth in turn has been pushing up land prices. QNB says there is correlation between the price of land and rentals, albeit with a six-month lag. As the price of development sites go up, landlords attempt to recoup their higher costs by increasing the rental rates for villas, apartments and office space.
Following an eight-month lull, land prices have been rising rapidly since March – a trend QNB said it expects to continue through 2014 and 2015.
Precedence
The last time rental rates were this high was in 2008. At that time, the government intervened in the housing market by imposing a two-year moratorium on rental rate hikes for most residential leases.
Recently, there have been calls for authorities to step in again. Late last month, a member of the Central Municipal Council said a law is needed to cap rental increases at no more than 10 percent every two years.
Mishal Al Dahnim said allowing rents to be determined by market forces of supply and demand would lead to an “unprecedented crisis.”
However, while rent control measures provide short-term relief to tenants, they may make problems worse in the long run by reducing the financial returns available to investors and developers – discouraging them from constructing new homes.
However, some real estate firms say homebuilders are already not constructing enough villas and flats for Qatar’s rapidly growing population, leading to a looming housing shortage – especially for low and middle-income expats.
Inflation projections
Housing is one of the biggest expenses for Qatar residents and a primary driver of inflation.
QNB said it expects rising rents to cause inflation to climb to 3.4 percent this year and up to 4 percent in 2015-16.
This overall inflation rate is expected to be tempered by declining international food prices, brought on by record global harvests and large stockpiles. However, several food importers told Doha News last month that they’ve yet to see any savings on their shipments.
QNB also forecasts that the cost of other imported products – namely clothing, footwear, furniture, textiles and home appliances – will only rise modestly in the coming months, helping to restrain the rise in the cost of living in Qatar.
Thoughts?
Come to Toronto and see what effect Chinese immigrants have had on the market.They buy houses above the asking rate just to get them.There are no starter homes, or very few, for 1st time Canadian buyers because developeres and real estate agents love large,expensive houses and more so if they can get prices above the actuall listing price.I guess it depends upon who is supplying and who is demanding and who is actually footing the bill.
Same in San Francisco
bla bla bla… same ol story practically every week in the papers but some companies still pay QR 5000 (not changed since 2007) as housing allowance even though their employees were entitled to a 3 bedroom fully furnished villa with utilities paid (unfurnished gives you up to QR 50K in furniture allowance) as per their contract. Co’s housing dept. says no housing units available so only option is to avail cash allowance which doesn’t even cover cost of a studio let alone a 3 bedroom villa! Not to mention that availing the cash allowance does not entitle you for the one-time furniture allowance of QR 50,000! Ahhh the ways of the world—to screw you over!!!
2008 was a rip-off and now too! But the only intelligent law that was issued to contain the raise of rents (mostly with no justification) was a temporary law…..strange hum?
Temporary law
yes I know, but never heard of temporary laws in efficient countries….
Well now we know it’s not and is only pretending to b ‘efficient’..
Unsustainable growth in a country where there are NO wage increases unless you are a Qatari National. The rest of us are unable to leave for better paid jobs or demand a pay rise. The only option is to leave Qatar for better paid work in UAE- where is the benefit in that for Qatar?
Rent rises reflect the pressure on land in Doha- the rest of the country remains undeveloped. I predict that the bubble will burst