Qatar’s real estate sector supported by favourable regulations

A steady decline in sale and rent prices since 2016 was accelerated in 2020 with the spread of the Covid-19 pandemic, which led to strong activity in property transactions. The lower prices – reflected in various indices – was not seen as cause for alarm in the sector, however, but a welcome market correction that is allowing Qatari properties to compete with other GCC markets on value.

Healthy property trade continued into 2021. While the total value of real estate transactions was lower in 2021 than in 2020, the volume was higher. This was supported by new government rules on foreign property ownership and sustained low interest rates on mortgages. The combination of favourable sales factors in 2020 and 2021 saw high demand soak up some supply; however, as construction continues apace, many opportunities remain for investment across the residential, office and retail segments.

Structure & Oversight

A number of government entities are involved in the regulation of real estate. Principally, the Ministry of Municipality is active on the front end, issuing building permits and construction certificates, while the Ministry of Justice (MoJ) registers property transactions. Through its Real Estate Brokerage Affairs Department, the MoJ also calls on real estate brokers and their offices to complete the licensing and accreditation procedures outlined in Law No. 22 of 2017. The office launched a dedicated portal for this procedure on its website in mid-2020.

In October 2020 the MoJ established the Office for Non-Qatari Real Estate Ownership following an August 2020 Cabinet resolution that introduced new regulations regarding foreign ownership of property. The office provides help to non-Qatari nationals who want to sell, purchase or invest in property in Qatar.

The most recent real estate office opened by the MoJ is the Registration and Authentication Office located in Qatar Financial Centre, which began operating in October 2021. It aims to better serve local and foreign investors established there, and support individuals and entities interested in real estate investment trusts.

Performance

In the third quarter of 2021 the real estate sector represented an estimated 6.9% of total GDP at constant prices and 11% of non-extractive industry GDP, according to the latest economic breakdown published by the Planning and Statistics Authority (PSA). The sector was valued at QR11.6bn ($3.2bn) in that quarter, up 1.7% year-on-year (y-o-y).

Although the second quarter of 2020 was arguably the most disruptive of the pandemic, when countries around the world first went into lockdown and normal business operations were suddenly upended, the “Annual Real Estate Bulletin” for 2021, published by the MoJ, showed that the value of real estate trading in Qatar for 2021 was lower than in 2020, at QR25.3bn ($6.9bn) compared to QR29.9bn ($8.2bn), respectively. However, the volume of transactions in 2021 (5374) outweighed the amount in 2020 (5116).

The real estate price index, compiled by the Qatar Central Bank, displays data dating back to mid-2006. Following the steep decline that coincided with the global financial crisis of 2007-08, the index shows a steady upwards trend from around 100 at the beginning of 2009 to more than 300 in late 2015 and early 2016. The figure dipped thereafter and has remained within the 200-300 range since, ending 2021 at 212, after peaking for the year at 223 in October. This price moderation in the years since 2016 has made Qatari real estate more competitive in the GCC region. “After years of oversupply, demand is catching up with the development pipeline. Rents across all segments stabilised in the fourth quarter of 2021 and the opening months of 2022 saw some moderate increases – especially in the residential segment,” Edd Brookes, general manager at real estate advisory firm Cushman & Wakefield Qatar, told OBG. “That said, properties are available at reasonable prices, and Qatar is now a more competitive and affordable real estate market within the region.”

Large variances exist among municipalities when it comes to real estate sales. Doha Municipality topped the list at QR9.69bn ($2.66bn) worth of sales across 1128 trades in 2020. The country’s remaining seven municipalities in order of transaction value are as follows: Al Rayyan (QR7.41bn [$2.03bn]; 1371 trades), Al Daayen (QR3.62bn [$993.58m]; 1189), Al Wakrah (QR2.02bn [$554.43m]; 615), Umm Salal (QR1.67bn [$458.36m]; 516), Al Khor and Dhekra (QR581.25m [$159.54m]; 297), Al Shamal (QR359.86m [$98.77m]; 243) and Al Sheehaniya (QR22.35m [$6.13m]; 17).

Average prices per square foot across all types of buildings and vacant land also vary by municipality. In 2021 the average price per square foot of buildings was highest in Doha, at QR903 ($248), and lowest in Al Sheehaniya, at QR182 ($49.95). Prices in Al Wakrah, Al Rayyan, Umm Salal and Al Daayen averaged around QR450 ($123) per sq foot. Al Shamal had the lowest average price per sq foot of vacant land in 2021, at QR143 ($39.25). This value was QR525 ($144) in Doha.

Foreign Ownership

The August 2020 Cabinet resolution outlines nine areas where foreigners can have full ownership of their property (also known as freehold status), namely West Bay, The Pearl, Al Khor, Dafna (administrative districts 60 and 61), Onaiza, Lusail, Al Kharaij and Jabal Thuaileb. It also lists 16 areas where non-Qatari nationals can rent residential or commercial properties for up to 99 years, or leasehold. These include Msheireb, Fareej Abdulaziz, Doha Al Jadeed, New Al Ghanim, Al Riffa and Old Al Hitmi, Aslata, Fereej Bin Mahmoud 22, Fereej Bin Mahmoud 23, Rawdat Al Khail, Mansoura and Fareej Bin Dirham, Najma, Umm Ghuwailina, Al Khalaifat, Al Sadd, Al Mirqab Al Jadeed and Fareej Al Nasr, and the Doha International Airport area.

If a foreigner purchases land, construction must be completed within four years. In order to obtain permanent residency in Qatar for themselves and their families, a foreigner must own or rent property worth at least QR730,000 ($200,000) and reside in the country for at least 90 days each year. For foreigners who own or rent property valued at QR3.7m ($1m) or more, permanent residency comes with the benefits of free health care and free education.

Residential

According to consultancy ValuStrat, the stock of residential units rose from 290,000 in 2018 to 298,000 in 2019, 303,000 in 2020 and 307,800 in 2021. Units completed in 2021 included 400 villas and 4380 apartments. The new apartment stock was concentrated in The Pearl (30%), due to the completion of a new tower at Abraj Bay; Lusail (25%), which also saw a new residential tower come on-line; and West Bay (15%). The majority of new villa stock was located in Luqta, Al Aziziya, Onaiza and Al Wakrah. Some 15,000 new residential units are forecast to hit the market in 2022.

ValuStrat’s residential price index trended downwards from a baseline of 100 in the first quarter of 2016 to end 2021 at 64.8. Home prices have declined in recent years, which is largely seen as a market correction that has put properties in Qatar on a more competitive footing. This trend is also demonstrated in the PSA’s housing and utilities index. While the consumer price index increased between mid-2020 and end-2021 to close the year at 101.3, the housing and utilities index declined to around 87.

The median value for home sales in 2021 was QR2.7m ($741,000), 4.7% higher than in 2020. Sales during the fourth quarter of 2021 were 27% lower than in the final quarter of 2020. However, the volume of transactions was up 4% in 2021. For rentals, one-bedroom apartments went for an average of QR4750 ($1300) per month in 2021, two-bedroom units QR7000 ($1920) and three-bedroom units QR7750 ($2130) – although this range was as high as QR8000-12,500 ($2200-3430) at The Pearl.

Average monthly rent for a three-bedroom villa was QR10,000 ($2740), four bedrooms QR11,250 ($3090) and five bedrooms QR12,000 ($3290). The rental price range widened to QR18,000-24,000 ($4940-6590) for villas at The Pearl. This area has proved enduringly popular – so much so that the MoJ’s real estate reports have a dedicated analysis on the zone. A total of 880 residential real estate transactions were made in The Pearl and Al Qassar areas in 2021 for a value of QR1.75bn ($480.3m), down from 1065 transactions and a total of QR2.33bn ($639.5m) in the previous year.

For residents or investors from abroad who are considering whether to rent or buy their home, ValuStrat puts the price-to-rent ratio at an average of 13 years for an apartment and 22 years for a villa.

Mortgage Market

Qatar’s mortgage market expanded in 2020 after the central bank lowered its overnight lending rate by 100 basis points in March of that year to 2.5%. This supported the real estate market and spurred the uptake of mortgages: the mortgage market was equal to approximately 29% of GDP in 2020, up from 23% the previous year and a significant improvement on the 8% recorded in 2010. The number of mortgage transactions made in 2020 stood at 1409 for a total value of QR54.22bn ($14.9bn) – figures that declined in 2021 to 1311 and QR41.99bn ($11.5bn), according to MoJ data. As is typical, Al Rayyan and Doha witnessed the highest share of mortgage transactions in 2021, at 34.3% and 33.2%, respectively, followed by Al Daayen (12.1%). In terms of mortgage value, nearly all municipalities had lower values in 2021 compared to 2020, with the exceptions of Al Rayyan and Al Shamal.

Expatriates who wish to take out a mortgage can borrow up to QR3m ($823,000) and typically need to make a down payment of 30%. Individual banks may impose age and income requirements as well: Qatar National Bank and Doha Bank, for example, both state that expats must be at least 21 years of age to access housing finance, should have the loan paid off by the time they are 60-65 years old and have a minimum income of QR15,000 ($4120) per month.

Office

In terms of office space, about half of the country’s total stock is located in West Bay, Lusail and Msheireb. Lusail hosted the vast majority of recent office construction, with 600,000 sq metres available as of the third quarter of 2021, according to data from Cushman & Wakefield. This same amount was added to total office supply in 2020, and 220,000 sq metres were added in 2021 – representing 40% of the supply projection at the start of the year. This brought total gross leasable area (GLA) to 5.4m sq metres and 5.6m sq metres in 2020 and 2021, respectively. Approximately 1.2m sq metres of GLA is set to be added in 2022.

ValuStrat puts the median asking rent for offices in the Doha metro area at QR73 ($20.04) per sq metre per month as of the end of 2021. West Bay (QR108, $29.64), Lusail (QR85, $23.33), and areas near the C and D Ring Roads (QR77, $21.13) are more expensive, while office space around Salwa Road (QR70, $19.21), Grand Hamad Avenue (QR70, $19.21) and Al Sadd (QR66, $18.12) is more affordable.

Many companies – especially foreign ones – either downsized their office space or put expansion plans on hold during the pandemic as revenue streams became unpredictable and professionals shifted to working from home. This, coupled with the large amount of GLA that came on-line in 2020, kept rents reasonable in 2021, but Cushman & Wakefield expect greater uptake in 2022 as firms resume expansion. However, supply is expected to outstrip demand in the short term, with vacancies of 20-25% in West Bay and Lusail in the second half of 2021 set to see a moderate increase in 2022. Lusail, for its part, has high-specification buildings and ample parking space to support office demand in the new area.

Retail & Industrial

The year 2021 closed with 1.96m sq metres of retail GLA – up from 1.93m sq metres in the first quarter of the year and 1.89m sq metres in mid-2020. This total was spread across 40,000 sq metres in neighbourhood shopping centres, 202,000 sq metres in community centres, 734,000 sq metres in regional centres and 981,000 sq metres in super-regional centres, which are shopping areas with GLA of more than 90,000 sq metres.

Rental prices for retail space have declined steadily in recent years, and the trend continued in 2021. The median monthly rent for retail space in malls decreased from QR230 ($63.13) per sq metre to QR210 ($57.64) between the first and fourth quarters of that year, while for street retail in Doha it declined from QR165 ($45.29) to QR155 ($42.54). For street retail outside of Doha the median monthly rent was down from QR155 ($42.54) to QR145 ($39.80). Lower retail rental costs are the result of continued supply coming on-line, giving renters a wider choice of locations (see Retail chapter).

In the warehouse segment, the average asking rent for a temperature-controlled warehouse was down by 15% y-o-y in the fourth quarter of 2021, according to ValuStrat. The monthly rent that quarter ranged between QR20 ($5.49) and QR35 ($9.61) per sq metre in Umm Salal, QR25-65 ($6.86-17.84) in Wukair, QR15-50 ($4.12-13.72) in the New Industrial Area and QR20-85 ($5.49-23.33) in the Old Industrial Area. Over this period the vacancy rate among large warehouses increased, while there was greater uptake of smaller facilities.

When it comes to factory space, demand in 2022 is expected to be fuelled by small and medium-sized industrial companies following the Qatar Development Bank’s launch of the Jahiz initiative in August 2021. The initiative helps pre-approved businesses secure ready-to-operate spaces at subsidised prices. It operates 31 facilities featuring factory space of up to 1500 sq metres and 430-sq-metre offices.

Large Developments

Proven as a popular area for new homes and offices, and one of the zones where foreigners can purchase freehold property, Lusail is a new urban centre some 20 km from Doha where building has accelerated in earnest since 2018. Spread over an area of 38 sq km, it is master planned and funded by the government’s Qatari Diar Real Estate Company. The city is connected to Doha proper by the Doha Metro’s Red Line and is served internally by the Lusail Tram. It is set to host 450,000 residents, workers and regular visitors.

Qatari Diar is building residential, office, retail, hospitality and entertainment properties in the city. Investment opportunities in The Seef mixed-use development were opened to Qataris and foreigners in late 2020. The area offers 600,000 sq metres of space across 2.3 km of waterfront promenade. Multiple standalone residential towers are being erected in the city, and the Paris-inspired Place Vendôme mall scheduled to open in the first half of 2022 will be the destination for luxury shopping, dining and hotels.

Another mega-project is the 1.3m-sq-metre Qetaifan Island North development. Located off the coast of Lusail, 60-65% of projects in phase 1 were complete as of October 2021, which include a beach club, water park, linear park and hotel to open to the public by the third quarter of 2022 – just in time for the 2022 FIFA World Cup. Qetaifan Projects, the primary developer, partnered with Saudi real estate company Dar Al Akan in late 2021 to build residential units and retail space in Qetaifan Island North. The deal is valued at some QR700m ($192.1m). Homes will be available as villas, apartments or penthouses with views of the open sea, beach or Lusail City. The partnership, which is Dar Al Akan’s first project in Qatar, follows the lifting of the economic blockade against Qatar in January 2021, which had been in place since mid-2017. Work on the project is expected to commence in the second quarter of 2022.

Outlook

High demand for real estate is expected to continue in 2022 after two years of robust activity in terms of transaction values and volumes despite the challenges brought on by the Covid-19 pandemic.

Part of this will be driven by the country’s hosting of the 2022 FIFA World Cup, which presents a unique opportunity to showcase Qatar’s offerings to the expected mass influx of players and visitors, some of whom may leverage travelling to Qatar for the tournament as a chance to check out properties. While many Western expatriates left the country after the 2014-16 international oil price collapse, dealing a blow to the residential segment, nationals of other regions stepped in to purchase homes as they sought to safeguard their wealth.

Qatar’s stability and open culture have long been drawcards for foreign investors in the real estate market, and the end to the economic blockade in January 2021 is likely to solidify this. The sector is expected to continue its strong performance in the coming years, underpinned by a well-regulated environment, a wide selection of quality and luxury properties, and established mortgage schemes.