Cluttons reports real estate prices in Oman are trending up thanks to improved infrastructure and increasing demand in several regions, particularly in coastal suburbs. Integrated Tourism Complexes like The Wave and Muscat Hills that boast attractive design features and enjoy prime locations are becoming very popular. Oman opened its real estate market to foreigner in 2002 and as a result the expat population is booming. That combined with a strong economy driven by oil production is setting the stage for gains, as evidenced by rising rents and new regulations to protect those who are willing to pay premium prices. For more on this continue reading the following article from Global Property Guide.
Residential prices in Oman are significantly down from their 2008 peak, especially within Integrated Tourism Complexes (ITCs). But prices are recovering, and transaction levels are up, according to the real estate agent Cluttons.
Demand is strong in established central areas such as Madinat Qaboos, Qurum, and Shatti Al Qurum. The coastal suburbs of Azaiba and Ghubrah North have become increasingly attractive as well. The opening of the Muscat Expressway has also paved the way for Bausher area’s rapid development.
ITCs such as The Wave and Muscat Hills, where prices fell during 2009, are now in demand due to their superior design, setting and facilities. Based on Savills Oman’s H1 2011 figures, asking prices in The Wave are:
- 2 bedroom apartments - OMR 120,000 (US$ 312,094)
- 3 bedroom townhouse - OMR 160,000 (US$ 416,126)
- 4 bedroom villas - OMR 230,000 (US$ 598,181)
- 5 bedroom villas - OMR 285,000 (US$ 741,224).
Another ITC development where properties began to be handed over during 2009 was the Muscat Hills Golf and Country Club. It offers villas and apartments with gardens and stunning views. 2 bedroom apartments are priced at OMR 120,000 (US$ 312,094). 4 bedroom villas are sold at OMR 275,000 (US$ 715,216), while 5 bedroom villas cost OMR 400,000 (US$ 1,040,314).
Real estate liberalization
The opening of Oman’s real estate market to foreigners began in 2002, as part of the “Vision 2020” plan, which aims to diversify Oman’s economic base and reduce its dependence on oil revenues. In December 2002, GCC nationals gained the right to own real estate for residential or investment purposes. In February 2006 other nationalities were also given the right to own real estate, but only in ITCs.
By buying property, expatriate owners automatically get residency rights for themselves and their immediate families.
Oil powers the economy, but it is diversifying
The diversification plan “Vision 2020” has been quite effective. Oil remains Oman’s top revenue generator and Oman’s 4.1% economic growth in 2010 was pushed by oil prices at US$76.6 per barrel. As of Q2 2011, crude oil prices were up again to US$98.5 per barrel.
Yet petroleum activities’ contribution to Oman’s total GDP hasn’t exceeded 50% since 2005. Services are now 37.5% of the country’s GDP, a rise of 11% during the period 2005-2010. Industrial activities are now 16.7% of GDP.
Expat population booming
The growing number of expats in Oman has been fuelling the real estate boom. In 2009, the expat population reached 1,156,358. Expat numbers been growing at an average rate of 4% per annum since 2003, according to the Ministry of National Economy.
Oman’s total population was estimated In 2010 to be 2.77 million, growing at an annual average rate of 2%, with native Omanis comprising 71% of the population, while the remaining 29% are expatriates. Oman’s population is young, with a median age of 24.1 years in 2011.
Two-tier rental market?
Rents in Oman have skyrocketed in the recent past, especially in Muscat and other high demand areas. After rising 21.4% in 2008, rents rose 16% in 2009. But by 2010, average rental rates were dropping. The rent hikes in the 2 years before mid-2008 prompted a huge new supply of residential rental properties especially in the capital area, according to Cluttons, much of it of lamentably poor design and quality.
Cluttons foresees a two-tier market developing. Properties well-matched to tenant desires in terms of quality and design will have high occupancy rates and relatively stable rental values. But poorly built properties will have declining rents, and be mostly uninhabited.
In central areas, monthly rents for two-bedroom apartments in Q1 2011 were around OMR 400 (US$ 1,040), down from OMR 425 (US$ 1,105), according to Savills Oman. Meanwhile, rents for 4-5 bed villas were around OMR 1,150 (US$ 2,991) to OMR 1,500 (US$ 3,901).
Rents in The Wave range from OMR 800 (US$ 2,081) to OMR 1,750 (US$ 4,551) depending on the housing type, while rents in Muscat Hills range from OMR 600 (US$ 1,560) to OMR 1,700 (US$ 4,421).
Average monthly rents in Oman in Q3 2011 ranged from OMR 330 (US$ 858) to OMR 750 (US$ 1,950), down from OMR 350 (US$ 910) to OMF 800 (US$ 2,081) in Q1 2011, according to Global Investment House.
New regulations to protect tenant rights
In June 2008, as a result of the rising rents, new rules were introduced.
- Landlords may now only increase the rent every 3 years, with a maximum rent increase of 7% of the annual rent stipulated in the lease contract.
- The law also bars landlords from evicting tenants before the end of the lease, and imposes a minimum lease period of 4 years for residential property, and 7 years for commercial property.
Demand for property in the capital is expected to increase in 2012, with GDP growth of 5% expected, and as infrastructure spending associated with the 8th Five-Year Plan (2011-2015) kicks in.
Personal loans, which include mortgages, have risen strongly since 2001, growing to around 40% of banks’ loan portfolios. But within that, the mortgage segment is rather small. "Within the personal loan segment, residential housing loan credit stood at 6.1%, which is well within [our] 10% ceiling," according to the Central Bank of Oman (CBO).
The CBO has had an 8% interest ceiling on personal loan interest rates since March 2008. In December 2011 the average lending rate was 6.19%.
Before 2006, only two banks were allowed to make housing loans – the government-owned Oman Housing Bank, and the private-owned Alliance Housing Bank. Then in 2006, commercial banks were permitted to offer housing mortgages up to a lending cap of 5% of the bank’s total loan portfolio. Then in June 2008, the CBO raised the housing lending cap from 5% to 10% of the loan portfolio.
Omani banks then started to offer housing loans to expatriates and foreign nationals. Typically, the maximum mortgage amount is 80% of the property value, payable over 20 years.
Land transaction levels were low in the first half of 2011, according to Savills Oman. Muscat area land values range from OMR 75 (US$195) per square metre (sq. m.) to OMR 140 (US$362) per sq. m.
Oman’s inflation was around 4% in 2011, just up from 3.3% in 2010. But the inflationary pressure brought by soaring food prices during 2011 has been stabilized, and inflation is likely to moderate.
The 8th Five-Year Plan
The Omani government recently reiterated its commitment to the projects in the 8th Five-Year Plan (2011-2015). Key 8th Five-Year Plan developments:
- New hospitals and housing programmes, human resource programmes and road and water infrastructure projects worth OMR 100 million (US$260 million).
- Major projects include the expansion of Muscat International Airport costing OMR 468 million (US$1,217 million), and the development of Salalah airport, costing OMR 294million (US$ 765 million).
- Seaport sector develpments including construction of quays (7, 8, 9) at Port of Salalah worth OMR 184 million (US$479 million) and infrastructure projects for docks related to Ad Duqum port worth OMR 216 million (US$562 million).
- Road infrastructure development worth OMR 1233.3 million (US$3,208 million).
In 2010, the total housing stock in Oman was 551,058 housing units, 27.9% up on the 430,996 units existing in 2003. Arabic houses comprised 31.2% of the total housing stock; villas, 28.6%; apartments, 20.9%; rural houses, 3.2%; and improvised housing units, 2.4%.
The housing sector has been given 21.5% more money in this year’s budget, with OMR 323 (US$ 840.05) million, up from US$691.8 million in 2011, and US$488.95 million in 2010. Around US$312.09 million has been earmarked for 2,500 low-income housing units.
This article was republished with permission from Global Property Guide.