Qatar Real Estate News
High land prices in Qatar lessen profitability
The land prices in Qatar are extremely high, and 10 times that of developed markets. The prices have grown to such a level, that even high-margin luxury developments become unprofitable to build, say experts.
Qatar permits foreign freehold property ownership in some specific zones. Although properties are still in its infancy stage, local investors prefer to trade land, rather than develop plots.
According to reports, FIFA's choice of Qatar being made the host of 2022 World Cup, has further heightened this trading, although growth in population and a vibrant economy are other factors contributing to this scenario.
The real estate price index by Qatar’s Central Bank, which includes land, villas and residential buildings, hit 271.3 points in March, marking 194.5 growth in January 2014.
Unlike its neighbouring Dubai, where property has gone from boom to bust, to partial boom again, and prices are still below the 2008 peak, locals and nationals of Middle East are still buyers of freehold units in Qatar.
The high land pricing makes it difficult to build low and middle-income housing, and in certain areas, speculators have pushed up prices to such a level that it is no longer financially viable to develop any property there, says Mark Proudley, the Associate Director at DTZ Qatar.
He estimates that the rentals have increased five to ten percent in some areas in recent months. Further, there is accommodation shortage across all sectors, particularly in low and mid-income sectors, as the supply line mostly caters to luxury projects.
Moreover, the dominance of government and semi-government developers have left little scope for private sector, points out Abdul Mohsen al-Hammadi, the Chief Executive of Dubai developer, Manazil Group.
Even in residential areas, land prices triple that of Dubai, and the return on investment is very low, he said.
During the first quarter of this year, property transactions in Qatar were QR26bn, marking 50 percent growth from the previous year. According to Deloitte, this includes several transactions between government entities.
According to Vaughn Weatherdon, the Vice President of real estate investment and advisory at QInvest, land sales account for about half the total value of property transactions in Qatar, while in most developed countries it was only five percent.
The Director of Real Estate for Middle East at Deloitte, Martin Cooper, said that land as a proportion of ticket price of villa or apartment is considerably higher in Doha than in the rest part of the world.
Posted on 2/6/2015
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