Cluttons in Oman: The Sultanate's real estate sector is being driven forward by increased government spending

The Sultanate's economy continues to perform well and recent government figures indicate that the national GDP grew by 13.2% during the first three quarters of 2012.

According to ratings agency Standard and Poor (S&P), the government budget will remain in surplus for the next two years, although it is strongly reliant on sustained oil prices. Fortunately, sector analysts are forecasting that oil prices will remain stable or even show a small increase this year.

Government spending on development and infrastructure projects during the eighth Five Year Plan (2011 - 2015), part of a long-term development strategy set out in the 'Vision 2020, will now amount to RO16m compared with the initial projection of RO12.1bn.

It will include a 45% rise in expenditure on housing, from RO323m to RO469m during 2013. The economic outlook for the country remains positive but reliant on sustained oil prices and production.

With the economy performing well and evidence of growing market confidence, new Integrated Tourism Complex (ITC) developments are coming to the market as the ITC residential sector shows increasing signs of activity.

Q4 2012 saw the launch of Phase 2 of Muscat Hills, which consists of 80 townhouses and villas being sold off-plan, with strong initial purchaser interest.

In addition, 2012 saw the start of preparatory earthworks for the Saraya Bandar Jissah ITC development at Qantab and the successful release of further villas and apartments at The Wave.

The increased interest from potential purchasers in the secondary market at Integrated Tourism Complex (ITC) developments, seen by Cluttons residential team in the latter part of 2012, has started to translate into transactions.Meanwhile the rental market at Muscat Hills and The Wave also continues to strengthen, with evidence of increasing rental values as demand outstrips supply.

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.

The logistics sector remains buoyant with Oman ranked 13th globally in the Emerging Market Logistics Index. The National Railway Company was formed in January 2013 to oversee the development of the National Railway System, which will link into the proposed GCC rail network. It is expected that a Duqm to Salalah link will also be included in Phase 1 of the project and that the railway network will be vital to the development of the ports at Salalah, Duqm and Sohar as regional freight hubs.

Sohar shows on-going development of both its port and warehousing facilities which will aid the projected move of freight traffic from Port Sultan Qaboos to Port of Sohar, while Port of Salalah continues to show strong growth in both general cargo and container volumes.

Demand for warehousing in the rental market remains strong as the industrial sector continues to expand, but the market continues to be significantly under-supplied with suitable facilities.

Cluttons believes that Oman has the potential to become a prime entry and exit point for goods for the GCC and that this potential is being driven forward by current and projected developments.

The wholesale and retail trade sector is showing a strong recovery following the impacts of the global financial downturn.

In addition, the improving economic climate appears to have acted as a spur for further development in the retail sector, with several new retail destinations either recently opened, under construction or at the planning stages.

The Al Khuwair/Bausher area is seeing on-going development of larger scale retail malls in the form of the Lulu extension, the Panorama Mall and the proposed extension of Muscat Grand Mall at the Tilal Complex.

Construction of the 10,850 sq m Wave commercial precinct, Marsa Village Retail Centre, started in November 2012 and is expected to be completed in Q2 2014.

The recent government decision to increase the minimum salary for Omanis in the private sector by over 60% from July 2013 will significantly increase purchasing power in the Sultanate and should help to drive the retail sector forward.