Oman’s Integrated Tourist Complexes (ITCs), which offer superior design and amenities for foreign property buyers, are now seeing price increases thanks to a growing expat population and successful diversification in the oil industry, the country’s largest economic contributor. Savills Oman reports price increases of as much as 25% in some ITCs as more foreigners are given rights to own property. Rents are also rising rapidly, particularly in well-designed complexes, in what Cluttons describes as a two-tier rental market. The market is separated into basic accommodations that are expected to decline in rental value and more premium units that are expected to perform much better. For more on this continue reading the following article from Global Property Guide.
Oman’s property market is now gaining momentum, especially within Integrated Tourism Complexes (ITCs). "After several challenging years following the impacts of the global financial crisis, there is evidence of growing strength and confidence in the ITC residential sector which is translating into a significant increase in developments," says Cluttons.
ITC developments such as The Wave and Muscat Hills, allow non-GCC citizens to buy freehold properties in the country. ITC prices fell during 2009. ITC properties are now in demand due to their superior design, setting and facilities.
"The increased interest from potential purchasers in the secondary market at Integrated Tourism Complex (ITC) developments has started to translate into transactions (in the first quarter of 2013)," reports Cluttons.
In Muscat Hills Golf & Country Club, traded values of residential properties soared by about 25% in Q1 2013 from the previous year, according to Savills Oman.
At Al Marsa, The Wave Muscat, resale values rose by an average of 12% in Q1 2013.
AVERAGE SALES PRICE IN THE SECONDARY MARKET | |||
Location | Property type | Value (OMR) | Value (USD) |
The Wave | Apartment, 2-bed | 120,000 – 150,000 | 310,816 – 388,521 |
The Wave | Townhouse, 3-bed | 180,000 – 225,000 | 466,225 – 582,781 |
The Wave | Villa, 5-bed | 380,000 – 650,000 | 984,252 – 1,683,590 |
Muscat Hills | Apartment, 2-bed | 120,000 – 140,000 | 310,816 – 362,619 |
Muscat Hills | Villa, 5-bed | 400,000 – 500,000 | 1,036,050 – 1,295,070 |
Source: Cluttons research |
New Integrated Tourism Complex (ITC) Developments in Oman:
- Muscat Hills Golf & Country Club (Phase II) – Launched in the last quarter of 2012, it is developed by Oman Urban Development Company LLC. It consists of 80 villas and townhouses. The price of four-bedroom units ranges from OMR270,000 (US$ 699,337) to OMR456,750 (US$1,183,040) while five and six-bedroom units are priced from OMR465,000 (US$1,204,410) to OMR900,000 (US$2,331,120).
- Saraya Bandar Jissah – Located in Qantab, construction was started in Q3 2012 and expected to be completed early next year. Saraya Bandar Jissah will be built on a 220 hectare and will include 2 five star hotels and 350 to 400 residential units.
- The Wave – At Reehan Gardens, 103 twin and detached villas were released in Q2 2012, with prices ranging from OMR200,00 (US$518,027) to OMR350,000 (US$ 906,548). At Marsa One, 121 apartments were released in Q3 2012, with prices ranging from OMR80,000 (US$207,211) to OMR375,000 (US$971,301). Recently, 40 Siraj apartments priced from OMR79,000 (US$204,621) to OMR190,000 (US$492,126).
Land values are rising in the Sultanate, according to Savills Oman. In Q1 2013:
AREA | RESIDENTIAL LAND PRICE PER SQ. M. | |
OMR | USD | |
Muttrah | 75 – 200 | 194 – 518 |
Muscat Area | 75 – 140 | 194 – 363 |
Wadi Kabir | 100 – 160 | 259 – 414 |
Wattayah | 120 – 250 | 311 – 648 |
Al Amrat | 10 – 60 | 26 – 155 |
Qurum | 200 – 400 | 518 – 1,036 |
Shatti Al Qurum | 350 – 500 | 907 – 1,295 |
MSQ | 280 – 350 | 725 – 907 |
Madinat Al Ilam | 280 – 350 | 725 – 907 |
Muna Heights | 150 – 250 | 389 – 648 |
Al Khuwair | 150 – 275 | 389 – 712 |
Al Ghubra South | 150 – 220 | 389 – 570 |
Al Ghubra North | 150 – 250 | 389 – 648 |
Bousher | 150 – 250 | 389 – 648 |
Al Azaiba North | 150 – 300 | 389 – 777 |
Al Seeb | 45 – 160 | 117 – 414 |
Al Mabela | 30 – 65 | 78 – 168 |
Al Khoud | 70 – 160 | 181 – 414 |
Al Hail | 70 – 160 | 181 – 414 |
Al Mawaleh | 70 – 130 | 181 – 337 |
Source: Savills Oman |
The value of property sales contracts in Oman soared by 19.9% to OMR404.9 million (US$1.05 billion) from January to July 2013, compared to the same period last year, according to the National Centre for Statistics and Information (NCSI).
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.
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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.