Pic: Abdul Basit / The Peninsula
Doha: Developers who are willing to sell properties during the COVID-19 crisis might provide favourable deals for the buyer in the form of discount on asking sale prices. This coupled with reduced interest rates offered by banks has increased attractiveness of real estate, particularly in the residential sector, as an investment option, consulting firm ValuStrat Qatar has said in its latest quarterly report titled ‘COVID-19 & The Qatar Housing Market’.
As of first quarter this year, Qatar’s ValuStrat Price Index (VPI) has estimated average gross yield of residential unit in Qatar to be 5.05 percent, which have been increasing since first quarter of 2018. Good buying opportunities could include properties approaching end of their financing term or those with troubled operations. Residential sector is considered most favourable as it is predicted to generate relatively stable cash flow compared to more risky commercial real estate assets.
Overall, during first quarter in 2020, transactional volumes of residential houses decreased by 13 percent Y-o-Y, and no change compared to fourth quarter in 2019. However, this fall cannot be fully attributed towards the advent of COVID-19 as transactional volumes have been dipping annually since second quarter of 2019.
Qatar’s VPI, a valuation-based index (100 points base set in Q1 2016), that tracks change in capital values for a representative fixed basket of properties, showed an overall 3.4 percent annual fall in capital values for residential sector, with trivial quarterly fall of 0.5 percent.
The report added that launches of all new real estate projects in Qatar including residential developments has been postponed for the next three to six months in order to minimise risk and limit cash flow problems, quoting insights from the country’s major real estate developers.
Some delays are to be expected in completion of on-going projects due to reduced number of labourers and logistical adjustments in supply chain. Furthermore most developers are reluctant to release new supply in the coming three months due to expectations of slow down in demand and rent reductions.
Citing insights from brokers and landlords, ValuStrat also highlighted that there has been at least 50 percent decrease in new enquiries for rental or sale of residential units. Negative impact on transactional volume is projected as sales are dependent on physical site visits and direct negotiations, which at the time are not feasible. This might be especially true for freehold areas which have a higher proportion of foreign investors.
Total housing stock by end of the first quarter was approximately 299,100 units with the addition of 900 apartments and 500 villas during the first three months. All new additions were during first two months of 2020.
