JEDDAH, 9 November 2004 — Bahrain’s property market has soared in the past year, outpacing the stock market, which rose almost 30 percent in 2003. Easing of residence and ownership restrictions seem to have made property in Bahrain more attractive, especially for expatriates working just across the causeway in Saudi Arabia.
Demand has been such that luxury developments in Bahrain have been able to take advantage of the rise. One-bedroom flats in the man-made Amwaj Islands are selling for $70,000 and upward, while the two-story townhouses in the nearby Mirage Beachfront development have been going for $120,000 or more.
According to a report prepared by Kuwait-based Global Investment House — Bahrain figures reveal that there has been a gradual rise in real estate transactions since 2001. Additionally, because of the lack of high yielding investment instruments, excess liquidity, and overall political stability, the real estate market grew in transactional terms (total value of traded land permits) to BD329.6 million in 2003, showing a 33.4 percent increase from BD246.95 million in 2002. Number of permits traded increased to 16,084 in 2003, up 7.3 percent from 14,987 in 2002.
The total value rose to BD102.83 million in 2Q 2004, increasing by 24 percent from BD82.92 million in 1Q2004. The total number of permits traded increased to 4,893 from 3,932 during the same period, growing by 24.4 percent. For the full year 2004, total value of traded land permits and total number of permits traded is expected to rise to BD371.5 million and 17,650 respectively, increasing by an estimated 13 percent and 10 percent respectively over 2003.
The number of registrations done by non-Bahrainis have also started to show in land registry records of Bahrain since 1Q 2004, when 46 permits valuing BD8.93 million got registered. Further in 2Q 2004, 38 permits valuing BD6.81 million got registered. Overall this is attributed to increased liquidity in the market, decrease in interest rates, and regulations allowing non-Bahrainis to buy real estate/property in Bahrain.
Construction Activity
Over the past few years, Bahrain witnessed a boom in land values in prime locations. The positive reforms being made by the government of Bahrain toward developing a strong economy and infrastructure have attracted many foreign and GCC investors to the island’s property market.
Over the past few years, Bahrain witnessed a boom in land values in prime locations. Bahrain has planned for the future economic growth with projects such as the Amwaj Island, Al Dana Resort, Durrat All Bahrain, the Bahrain-Qatar causeway, the expansion work for the international airport, Sheikh Khalifa port, Sheikh Hamad causeway, the F1 international circuit, major hotel developments, and the recently announced Bahrain Financial Harbor project.
Bahrain has witnessed frantic real estate and construction activities in recent years. After having declined from 1999 to 2001, the number of commercial licenses to the construction sector has been increasing at a rapid rate since 2002. For the 1H 2004, 171 and 341 licenses were issued for the construction sector and real estate, rentals & associated activities sector respectively, showing a change of -36.2 percent and 28 percent respectively, as compared to the corresponding figure in 1H 2003.
However, for the full year 2003, 624 commercial licenses were issued to the construction sector as compared to 292 in 2002, thus recording a growth of 114 percent.
These figures indicate hectic activity in the construction and real estate sector in Bahrain, which is contributing increasingly to the GDP of the country. Construction alone contributed BD139 million (3.85 percent of GDP) in 2003, as compared to BD134.33 million in 2002 (4.2 percent of GDP). While real estate & business services contributed BD320.9 million in 2003 (8.9 percent of GDP), as compared to BD310 million in 2002 (9.8 percent of GDP).
The boom in the construction and real estate sector, has coincided with a 11 percent increase in lending from BD165.8 million for period ending Q4 2003 to BD183.8 million period ending Q1 2004. In recent quarters, credit to the real estate and construction sector has hovered around 9-10 percent of the total credit to the private sector.
Demand & Supply
Demand and supply for residential sector in real estate can be broken down into 2 categories - housing units and the Apartments/Flats. Despite the increasing activities in the real estate sector, there exists shortage of housing in Bahrain, especially in the low to medium income family range. In Bahrain, about 3,000 marriages are conducted each year and assuming a 50 percent requirement of housing units, about 1,500 houses are needed per annum on a continuous basis.
There is a demand for residential houses in Bahrain and there remains a huge gap that needs to be filled. As a result, the Cabinet approved an additional support of BD12 million to the Housing Bank.
According to 2001 data, there are approximately 36,000 flats in Bahrain contained in 8,076 buildings. Demand for flats is seen to increase considering the country’s high population growth and influx of visitors from across the King Fahd causeway. Assuming a ratio of 4 expatriates to 1 flat, leads to a bare minimum requirement of around 1,750 newly constructed flats per annum. Additionally, the US military still remains a major client for renting flats. The population density in Bahrain is among the highest in the world. This has resulted in land being an investment and a trading tool in Bahrain. With land being a limited resource, demand is likely to increase with time especially should the population growth rate in Bahrain continue at its current pace.
In Manama area, plots are hard to find and the going rate ranges from BD30-75 per sqft for residential to BD40-90 per sqft for commercial real estate. Most construction is happening on plots with demolished buildings. Northern Muharraq, which is opposite to the diplomatic area, could have a very promising future depending on how facilities will be provided and how fast it will develop.