New information from CB Richard Ellis’s Bahrain office indicates that the residential market in the Kingdom is holding up considerably better than anticipated.
The company’s latest Property Insight from Bahrain, mentioned that a number of new residential projects were announced in the first half of 2009 whilst the number cancelled was minimal compared with other regional centres. Some clarity has also begun to emerge in the residential sector, as the status of most projects became clearer and macroeconomic figures provided positive indicators.
Mike Williams, Senior Director Research & Consultancy, CB Richard Ellis Bahrain said:
“The situation in Bahrain is somewhat mixed with a large delivery pipeline of luxury apartment units while the most pressing need is for social or affordable housing. Employment growth has continued in 2009 but the vast majority of new employment has been in the low-income sector with consequent implications for future housing demand.”
The mortgage market experienced a significant slowdown in Q1 and Q2 and this has led to a significant fall in transaction activity which is expected to continue, at least in the short term.
Mike Williams adds:
“One of the main factors behind this slowdown in the mortgage market is its continued dominance by Sharia-compliant products; whereby the development risk is carried by the lender, making such products both expensive and scarce at present. However, as the market settles down, risk levels drop and the cost of finance reduces, we consider this to be a long-term benefit providing considerable upside factors for prices over the next few years”
The office market is undergoing an interesting transition phase with a gradual migration of demand for quality office space moving from Diplomatic Area to Seef District. Class B space in what was formerly a mixed-use area is now achieving significantly higher rents than Class A space in the Kingdom’s CBD. This situation is likely to continue while the chronic parking and traffic issues that plague the Diplomatic Area remain unresolved.