Ray Petersen –
That landlords are having difficulty renting out their properties, especially in the capital, is no surprise, as the construction industry has continued at breakneck speed for some years now in spite of the austerity moves introduced by government and private sector employees.
It’s not a matter, I believe, for too much introspection, or complaint, as we can’t ‘un-build’ the rental housing properties now they are up, or for that matter, those that are under construction.
There will also be winners and losers. Winners will, well should be, tenants, as rents should fall, though given my own experience, landlords are pretty hard to budge. The losers will be those without a supplementary income, who felt they could do nothing but collect rents and get rich. That will be a challenge from here on.
What it does mean though, is that the lenders, banks and private institutions must now more carefully assess applications for non-familial housing loans, and that can sometimes prove difficult as bank staff are unwilling to offend their clients by refusing such loans.
The unpalatable reality is that, just for now, there are far too many rental properties out there, and with expatriate workforces being reduced in the expatriate sector, it’s not going to get any better for a while.
Recently, a significant number of expatriate pharmacists, nurses and doctors have been replaced as part of a further Omanisation of public sector health services. Those three decisions alone must have a comparative impact upon the demand for housing, especially in the capital.
The fiscal pressures upon private sector employers such as the automobile retail industry, as new car sales are in decline, will surely also begin to ‘bite,’ and these type of consequences are no-one’s fault, but downstream effects of a tighter economy.
One undeniable reality will be that many entrepreneurs, or ‘businessmen’ who have, and had, plans of building a couple of houses, or an apartment block, to provide them with a passive income, will now have to think again. The reality is that there isn’t room in any society’s financial model for too many property magnates, and that more young Omani men may have to consider alternative life and work strategies.
This is not only an Omani situation, as in Mumbai, for example, according to the Economic Times (2015), “The real estate rental market saw a very big correction between 1995 and 2001, when rental returns crashed by as much as half in many districts.”
The West Australian rental property market also suffered a significant decline in the first quarter of 2012, when demand fell by only 2-3 per cent, yet rental income was affected to the tune of almost 10 per cent, according to the Real Estate Institute of West Australia (2012).
So, the rest of the world has been there before, and there are an awful lot of fiscal models for working through such issues.
The Sultanate’s movers and shakers just have to utilise the knowledge gained from those experiences to effectively manage what is not so much a crisis, at the moment, as an opportunity.
Now, as much as this situation doesn’t bode well for anyone very much at the sharp end of the construction industries, in all such situations an opportunity exists for the construction industry as a whole, to look at new building methods and technologies, which appear to have largely been ignored in favour of retaining traditional methods.
I saw, at a housing show recently, a Chinese company marketing prefabricated houses, fully insulated, with earthquake safety standard steel or aluminium frames, lots of pleasing safety and environmental features, that offer pause to consider how far the wider world is developing in construction.
Opportunities then for business diversity, and construction will just be the tip of the iceberg as the rental market tightens its collective belt.