The healthy macro-economic environment in
2005 has spilled its effects over all
the activities in Oman
including real estate. The total plots distributed have
increased from 11,925 plots in 2003 to 35,359 plots in 2004,
with the residential sector capturing the biggest share of the
boom, registering 85.7% of the total number of plots distributed
in 2004. Again, most of the real estate activity was
concentrated in the capital city "Muscat" representing around
38% of total plots distributed in 2004.
Key drivers of the Omani real estate sector
includes growing population, young demography, an inflow of
expatriates labor, interest rates, liquidity, financing options,
construction costs, and foreign ownership legislation. We
believe that the foreign ownership law will be a significant
driver of the demand for real estate in the future. A Royal
decree 12/2006 was announced recently, which expands foreign
ownership rights which were formerly restricted to GCC nationals
to include non-GCC nationals as well. The executive regulations
of the new law are expected to be issued shortly by the Ministry
of Housing, Water and Electricity. Large projects like "The
Wave", "The Muscat Golf Course" project and The "Blue City" are
expected to benefit from the law.
The residential segment has witnessed major price
appreciation in 2005. Land prices have shot up in Oman during
the last year, especially prices of lands adjacent to mega
projects. Most of the appreciation in prices was driven by
speculative buying from GCC investors. Work on "The Wave"
project has driven up the prices of adjoining seaside plots in
Azaiba which shot up from RO100 per sqm to over RO220 per sqm in
less than a year. We believe that the trend of escalating prices
is likely to continue led by GCC investors' land purchases.
The areas expected to witness the highest
escalation in prices are the areas adjacent to the mega projects
undertaken by the government in tourist designated zones such as
"Al Azaiba", which is close to "The Wave" project, and the Sohar
industrial area which is seeing increased activity, with lots of
projects coming up. Residential rents have also climbed by 25%
year on year basis in 2005. We expect the residential segment to
witness increased activity supported by the positive outlook of
the economy, the influx of expatriates, the need for good
quality housing, and above all the recent announcement of
foreign freehold ownership law.
The office segment in Oman witnessed a major
shift from a stagnant stage characterized by weak demand, and
lack of foreign investments to a shortage of supply situation
spurred by the increase in the number of new companies setting
up base driven by the upbeat state of the economy. Demand for
high quality commercial space has started to pick up recently
creating a shortage of office space, and inducing an increase in
commercial rents. With demand for office space outstripping
supply, monthly rentals have gone up from RO2.5/sqm in 2004 to
RO6-7/sqm in 2005, and yields are currently ranging between
9%-10%, which is low compared to other GCC countries. We expect
demand and returns on commercial space to pick up, spurred by
the healthy macro-economic environment. The retail segment
however did not witness fundamental changes since our last
report. With a low consumer appetite in Oman, we do not foresee
any demand for retail space.
The industrial segment is another segment
witnessing a huge transformation giving that the manufacturing
sector is one the cornerstones of Oman's diversification plan.
The government has been trying to position Sohar Port as an
industrial hub. Sohar is undergoing a huge transformation with
around US$12bn worth of developments in the pipeline. The
government has been very supportive to new developments, giving
out land to big developers under long term leases at very low
annual rental rates of RO0.75/sqm. Five major projects have been
already announced namely Sohar Refinery Project, Sohar Methanol
Project, Oman-India Fertilizer Project, Ferro-Chrome Project,
and Sohar Fertilizer Project. Of these, work has already
progressed in respect of Sohar Refinery Project and the
Oman-India Fertilizer Project. We expect the demand for
industrial space to pick up as the government continues to open
up for foreign investments, which will in turn create demand for
the residential sector coming from the inflow of expatriates.
The tourism sector is one of the major
components of the government's diversification plan. The
government has undertaken lot of measures to revive the sector,
starting with the establishment the Ministry of Tourism in 2004.
The freehold ownership law which allows foreigners to own real
estate in designated integrated tourism-related areas on a
freehold basis is another sign of the government's commitment to
revive the sector. The government is also granting subsidized
land to major developers for tourism projects. Accordingly,
tourism related projects such as the Wave, Blue City, Muscat
Golf & Country Club, and Yitti have snowballed in Oman.
The hotel business in Oman has picked up
last year after a long period of recession, which is evident
from the strong financial performance of hotel operators in
2005. Hotel occupancy rates are almost 100%, and there is
already a massive shortage of hotel rooms in Oman. Around 1000
hotel rooms will be needed in the upcoming 3 years to satisfy
the increasing demand mainly from European tourists.
The real estate market in Oman has changed
rapidly over the last year, and is expected to gain further
momentum in the short to medium term. We believe that the future
of the Omani real estate market looks bright underpinned by
strong macroeconomic conditions, high liquidity, favorable
demographics, and a proactive government which encourages
private & foreign participation in the sector. (Source: Global
Investment House – Kuwait).
Source:
http://www.albawaba.com/en/countries/Oman/197773
