Oman Real estate market analysis 2020
By the end of the year 2019, the economic situation around the globe was not very favourable for the real estate sector especially in the GCC countries due to the low oil prices and lack of investment and projects coming up. At the beginning of 2020 things, however, took a turn for worse in the GCC with the advent of COVID-19. As the lockdowns around the globe started the result was the slowdown in all businesses across the GCC and the Sultanate. Furthermore, with the implications of some new laws and procedures adopted by the government, many businesses found it hard to sustain their manpower and stay afloat resulting in many organizations downsizing or closing down completely.
As the sultanate’s real estate rental market depends mostly on ex-pats in the residential sector and foreign businesses in the commercial sector, the impact of the lockdowns was felt immediately. As many expats who had been laid off from their jobs, and the organizations that had to close down, left a big vacancy gap in the property market. Even the organizations that stayed afloat had to make tough decisions where in most cases the salaries for the staff were reduced down 50% or even in some cases 25%.
Due to these events, many landlords had to make some hard decisions to maintain their occupancy levels in the residential and commercial sectors alike. Many had agreed to waive rents for the tenants for a certain number of months or at least offer concessions on the rent, generally from 20%-50% of the original rents for the tenants that were most affected by the pandemic.
Hence, due to this reduction of new expats coming into the country and many leaving, most of the movement felt in the real estate sector was of people and organizations downsizing. The same was felt in the government sectors as many authorities merged leaving no need in the renting of multiple properties rented from individual landlords. As many new buildings keep coming up around the city that is offering very competitive rates and more amenities, much of the movement was also seen between old and new properties. Currently, we estimate a general occupancy of a 10-15 years old or older building to be at 50% or under however, many of the newer properties have seen a rise in the occupancy of an average around 70% or above.
Overall the rentals generally all over the city have seen a sharp drop with the decline of at least 20%-30% for residential and commercial alike for the beginning to the end of the year 2020.
Current market situation and forecast for 2021
The decrees in the overall occupancy levels around the city are still steady as many expats are leaving the country and with the government’s efforts in the implementation of Omanization. The latest released data confirms that currently, we have at least more than 75,000 vacant rentable units vacant in the city.
As the uncertainty remains as to when the pandemic will end and global economic recovery will start, we expect the rents to drop further this year. However, the government has taken many initiatives to assist in the real estate sector, we hope for stability and recovery of the business by the year-end.
With the above hurdles mentioned in the real estate sector, there is a silver lining on the horizon. The current overall market situation has resulted in a lot of innovation from the realtors, many real estate companies and landlords are coming up with offers such as one or two months free on the lease and renewals in order to sustain their tenants. And as the competition increases, by default the quality of the services provided as well in order to sustain and increase the revenues generated by the properties.
Also, considering the Sultanate’s 2040 vision the government has also made it easier for foreign investors and the residents living in Oman to own properties in many different ITCs (Integrates Tourism Complexes). Not only can the properties be bought by the expats in these projects and be kept for themselves or leased as investments, but the government also provides resident visas for the property owner and their spouse and children. With many ITCs ready such as Al Mouj, Muscat Hills and Hawana Lagoon Salalah and many other mixed-use projects coming up around the Sultanate such as Quriat Project in Quriat, Al Nakheel in Barka and the Sur Gate Project in Al Sharqiah the future seems bright.
Further to this, as even the oil prices are showing a rise, the Sultanate’s focus is not to be only oil-dependent in the future. Oman has a huge potential in the tourism sector as well and with the government taking steps in achieving the vision 2040 a lot of improvements will be seen in the sectors of agriculture, technology, ecosystems etc… which will result in welcoming more and more tourists and investors and aiding in the growth of real estate market.
With the untiring efforts of the ministry of health in the vaccinations campaigns, we are confident that this pandemic will soon be over and the overall economic recovery will soon be underway with business resuming as normal by or before the year’s end and all the positives obtained from this crises with help polishing the quality of the real estate market in Oman.