Cluttons: Oman residential sector shows some signs of stability

The report shows that rental values for residential properties have stabilised to some degree, save for key popular residential developments which are experiencing some price increases due to a shortage of supply.

The overall economic picture is bright and the value of property traded in the first five months of the year has increased by 59.7% compared to the same period in 2011, rising from OMR506m ($1.3bn) to OMR808m ($2.1bn).

The figures indicate that there is greater confidence and activity in the real estate market backed by an increasing availability of mortgage finance. Although there has been significant development of residential properties over recent years, the residential leasing market continues to suffer from a lack of good quality, well-designed stock suited to tenant expectations and desires. There is a particular shortage of good quality villas in the central and western areas in the OMR 1,000 to 1,800 ($2,600 to 4,700) per month range. When available, such properties are absorbed quickly at above average values.

Much of the demand in 2012 is focused on good quality developments with amenities such as allocated parking, on-site gyms and swimming pools, green common spaces and children's play areas. Tenants have become significantly more discerning, creating strong demand for these types of developments, which will continue to be in short supply throughout the next year. Rental values have stabilised to a degree over the year, but it is evident that values in less favourable locations are continuing to show a downward trend.

As a result of the above, interest in the rental market for recently completed apartments in the Tilal Complex in Al Khuwair has been extremely strong, reaching values of OMR500 to 600 ($1,300 to 1,600) per month for a one bedroom apartment up to OMR 1,000 to 1,200 ($2,600 to 3,100) for a three bedroom apartment.

This is significantly higher than the average rental figures for surrounding areas.

The Cluttons residential sales team reports increased interest from potential purchasers in the secondary market at Integrated Tourism Complexes (ITC) such as The Wave and Muscat Hills.

Interest is particularly strong for properties at The Wave. However, this increased purchaser interest has not translated into a significant rise in actual sales as the asking prices are higher than purchaser expectations.

Cluttons forecasts that the trend for well-serviced, well-located properties experiencing an increase in demand and even some increase in rental prices will continue. On the other hand, poorer properties in less favourable locations are expected to show some softening of rental values over the remainder of 2012. Sales transactions of ITC properties in the secondary market are unlikely to increase this year.

Cluttons LLP is an independent partnership of chartered surveyors founded in 1765. With a network of offices in the UK, Europe, Middle East and South Africa, Cluttons LLP offers a wide range of professional property management, agency and consultancy services across the commercial and residential sectors, for both investors and occupiers.