Market correction is seen across all rental sectors of Qatar's property market, researcher ValuStrat said and noted rents continue to moderate in the country. In its first 2023 review of Qatar’s real estate market, ValuStrat noted that after witnessing sizeable rent growth last year, it has recorded ‘market correction’ in all rental sectors of the property market in the country. Average leasing rates in the residential, office, and retail segments declined compared to fourth quarter (Q4) 2022.
On the other hand, hotel average daily rates (ADRs) grew by 5% year-on-year (y-o-y). As a result, the ValuStrat Price Index (VPI), representing residential capital values, remained marginally stable. ValuStrat's General Manager (Qatar) Pawel Banach commented, “With the advent of 2023, we are observing a new phase of the real estate market in Qatar. After hosting one of the most significant global sporting events, “Qatar is undergoing a period of adjustment. In all the sectors, there was a substantial expansion in terms of supply last year. Post-FIFA World Cup Qatar 2022, we have observed a fall in demand.
“The increase in oversupply is contributing to pervasive market corrections. As the overall real estate sector evolves in 2023, we are projecting the downward adjustments to continue, and the extent of the fall will depend upon the expectations and actions of all involved public and private stakeholders.”
The VPI for Q1, 2023 remained broadly consistent, recording a marginal dip of 0.2% quarter-on-quarter (QoQ). Despite the minor quarterly decrease, the VPI saw a 0.3% annual rise at 65.1 points, corroborating stabilisation in the residential sales market.
Regarding housing supply, an estimated 1,500 units were added during Q1, 2023, increasing residential stock to 336,440 units. Compared to Q4, 2022, median monthly rental rates declined to QR9,250, reflecting a 5.1% depreciation. While market corrections were expected after hosting the FIFA World Cup 2022 last quarter, the median asking rent in the residential market is still 3% higher y-o-y, ValuStrat noted.
After a streak of quarterly increases in the villa sub-market during 2022, the median asking rent in the villa sub-market dropped by 3.1% QoQ. However, the median asking rents in apartment and villa markets remained higher than in Q1, 2022. It is also observed that the quarterly decline in leasing rates is higher in prime areas compared to secondary locations.
On the commercial front, with the completion of 177,000sq m gross leasable area (GLA) of office space in Q1, 2023, office stock has reached 6.78mn sq m GLA. Approximately 500,000sq m GLA remains in the pipeline for 2023, with 85% of the new commercial supply expected in West Bay and Lusail.
Despite the additional supply in the market, the citywide median monthly asking rent for offices recorded a quarterly dip of 1.4%, standing at QR70 per sq m. With the expansion of oversupply, rents for offices are projected to continue to decline significantly in secondary commercial districts, ValuStrat said.
ValuStrat Qatar head (Research) Anum Hasan commented, “We are experiencing a period of decline, which might not be detrimental to the dynamics of the sector. Prices and rents are adjusted to correct the demand and supply gap.”
“Although we have observed the performance to vary amongst sub-asset classes, the extent of the decline is not consistent for all. The rental trend of the villa market is relatively more stable than the apartment market. “Fall in leasing rates are softening in secondary residential locations targeting low-income households. Grade-A offices are experiencing a slower rent decline than Grade B/C office projects. The underlying forces of supply and demand are in play in all markets.”
The organised retail sector experienced a minor growth in supply over the last quarter, with the total stock reaching 2.4mn sq m GLA, after the opening of Aventura Mall (11,000sq m GLA) in Ain Khaled. In terms of median monthly rent for shopping centres, rates softened slightly to QR200 per sq m, marking a 4.8% quarter-on-quarter (QoQ) and a 7% Y-o-Y decrease, respectively.
Nevertheless, malls across Qatar experienced increased footfall due to tourism initiatives such as Shop Qatar 2023. Following the legacy of hosting the FIFA World Cup 2022, visitor numbers exceeded 1.1mn in Q1, 2023, marking a staggering 268% y-o-y surge.
While the ADR experienced a 71% reduction to QR429 in the first two months of 2023, this quarterly decline was expected after rates skyrocketed to accommodate FIFA tourist’s last quarter. Notably, the ADR still reflects a 5% increase y-o-y, despite the surge in the supply of hotel rooms last year, ValuStrat said.
