Real estate occupancy dips to 70 per cent on oversupply

Muscat, Nov 26 -

A widening demand-supply gap in the real estate sector, spurred by a proliferation of new residential developments, has adversely impacted occupancy levels now averaging 70 per cent in the capital region, according to the Chairman of the Oman Real Estate Association (ORA).

Hassan Mohammed Juma al Lawati (pictured) said the slump in occupancy trends has been driven by a combination of factors aided in significant part by the downturn in the economy.

He told a construction summit held in the city recently that vacant rentals are about 25 per cent in some parts of Muscat Governorate, dropping further to 50 per cent in others. Occupancy levels, however, average 70 per cent across the capital region, he stated.

“When you talk about the real estate market, obviously there is a gap between demand and supply,” said Al Lawati, who was elected as Chairman of Oman Real Estate Association in March this year. He attributed this gulf to two reasons: the slowdown in the economy, coinciding with a significant uptick in the supply of new residential units.

According to the official, the demand-supply imbalance will continue to remain significant even if oil prices remain high. This is primarily because the volume of new units coming on stream continues to “surpass” demand, although the pace of growth of this gap is “slowing down”, he noted.

Also skewing the demand-supply dynamics is the changing make-up of expatriates, who represent the primary market for rented apartments in the Sultanate. Expat numbers totaled around 1.8 million as of end-2017, with a net 50,000-55,000 people joining their ranks by September this year. Thus, although there has been a positive inflow of expatriates, many of the new arrivals belong to blue-collar segments of the workforce who typically do not patronise rented properties, he explained. Residential property rents have also declined, acknowledged Al Lawati, attributing the drop not so much to the growth in supply, but due to pressure from lenders that provided the initial finance for the project. “(The landlords) had to bring down their rents in order to service their debts,” he said.

Also exacerbating the challenges for real estate investor is the dearth of accurate information on the property market, said the official.

“We lack an agency that gives real data. The last housing research was done in 2003 and it was shown that we had 125,000 units in Muscat at the time. But we think we are now touching around 250,000 units.”

Investment in the construction sector is expected to burgeon in 2019, Al Lawati said, citing newly published research on the property market.

The sector is projected to grow by 11.5 per cent in 2019, surpassing growth trends in the markets of the Middle East and North Africa region, he added.

Conrad Prabhu