However, growth prospects appear good in the long term and the company’s expectations are for the market to rebound slowly but surely over the coming years.
Residential leasing sector – pricing analysis:
* New tenant housing budgets have seen a decrease of 25% to 30% from previous years;
* Villa rental figures have softened since Q4 2010 to an average of 1100 OR per month for a 4/5 bedroom villa in central/western Muscat;
* Outlying areas such as Bowsher and Mawaleh have increased in popularity driven by lower prices and improved road access to central areas;
* Integrated Tourism Complex (ICT) projects such as The Wave and Muscat Hills remain in demand due to the quality of housing and modern design.
Residential leasing sector – market summary:
There are some signs of increasing stability in the residential leasing market but further softening of rental values can be expected in the short to medium term, particularly as the supply of new apartments comes into the market. The long-term outlook is that the market should start to show signs of recovery as the economy continues to expand.
Cluttons notes that positive growth in the number of tenants seeking housing results from both new employees coming into the country as companies expand and existing residents seeking better areas or larger properties for their money.
The report also highlights that there has been a notable change in tenant demand trends over recent years. The average housing budgets are lower and many tenants are offering significantly lower than listed rates while continuing to expect the highest of standards. On average, new tenant housing budgets have seen a decrease by 25-30% from previous years, which have resulted in tenants having to search harder and further afield to meet their expectations.
Overall there has been a continued growth in available housing but the design and quality of housing has not necessarily progressed to meet tenant requirements. As the market changes, property types will need to shift with tenant demands and developers will need to build more modern housing aimed at the consumer’s wants and needs. Cluttons foresees a two-tier market developing between well-designed properties suited to tenant requirements and properties which are poorly designed or built.
Residential sales sector – pricing analysis:
* Demand increases for affordable housing, with five developments comprising 346 villas in development in the Seeb area;
* The average size of these villas is 240 to 280 square metres of built up area;
* Average prices for affordable housing developments are generally from RO 300 to 320 per square metre.
Residential sales sector – market analysis:
The population of Oman has grown with approximately 73% of the population now living in urban areas. The result has been an increasing need for housing designed for and affordable to the local population in western areas of the city such as Al Khoud and Seeb.
Several developers have picked up on these trends and there is increasing development of affordable housing in these areas, which is boosted by the recent opening of the Muscat Expressway which has improved travel times to the more established, central parts of the city.
Affordable housing is generally priced at RO 300 to 320 per square metre, which has led to strong market interest and sales. Properties priced above this level have struggled in comparison. Cluttons expects to see further expansion in this nascent sector.
Retail sector – pricing analysis:
* Rental rates in purpose built retail centres vary from RO 8 to RO 32 per square metre per month;
* Rental rates in retail units such as Muscat City Centre, The Wave and the Royal Opera House are still high with retailers willing to pay the premium to be associated with these developments;
* 65% of demand is focused at units in the 100 – 200m squared category, compared with 10% at over 1000m squared;
* In 2010 it was estimated that Oman offered 300,000 square metres of leasable space within retail malls
Retail sector – market analysis:
The pace of retail mall development has slowed significantly, and Cluttons notes that it would appear that the appetite for further large-scale retail space has been sated to a large degree in the short to medium term. Reasons for this include the fact that levels of per capita disposable income are relatively low in comparison to other GCC countries, and that Muscat is not seen as a shopping destination, unlike Dubai.
The only large-scale retail mall currently under development is the delayed 60,000 square metre Tilal Grand Mall in Al Khuwair.
Interest remains good for smaller scale retail malls in niche locations aimed at high-end consumers. These are attracting significant tenant interest and high rental values.
Examples include the Royal Opera House Mall and the retail development at the Wave; both offer around 6000 square metres of leasing space.
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