posted by JasperC on May 11
Rather than suffering dramatically from a withdrawal of foreign investment in the real estate sector that led to a collapse, Oman found its fledgling property sector grind to an unspectacular halt.
Unlike some of its near neighbours, Oman’s population of roughly 3.5 million is largely made of nationals, with only 580,000 non-nationals (17%).
With this in mind, the challenge is not so much attracting foreign investment, but providing for a burgeoning, youthful Omani population.
Chief executive of Cluttons Middle East, Ian Gladwin asserted that the past two years for Oman’s real estate sector had very much been a case of ‘wait and see’.
“The market has been through a solid two years of inactivity. Investors, developers and real estate third party users have been watching and waiting to judge/measure where the market correction is likely to bottom out,” he told AMEInfo.com.
Despite this rather flat spell, Gladwin said the company was “starting to see emerging signs of activity as the banking sector revisits the real estate market” and that “liquidity is not a constraint”.
Lending conditions improve
This was a view shared by Savills Oman managing partner Christopher J. Steel, who believed that the current affordability of loans for housing was good.
“The Banks in Oman are initiating attractive new loan schemes that allow most to own property if they are in full time employment,” he explained.
“There is a perceived shortage of supply to meet demand but the cultural aspect of extended family living conditions cushions the market from too greater demand/supply imbalance (i.e people just continue living in the larger family unit until property options become available).”
Certainly for Oman’s real estate sector, there is no reliance on foreign investment – it is a sector dominated by Omani nationals.
Gladwin saw the split as 80/20 weighted towards the domestic market with Indians and GCC nationals comprising the majority of the 20%.
Likewise, Steel explained there isn’t a large speculative expatriate buying market in Oman, although there was one in the boom period which ended in 2008.
“Only a few properties are sold to non-nationals in the current market scenario,” he continued.
“Foreign nationals can only buy in designated Integrated Tourist Developments (ITCs ) which give freehold ownership with full residency visa rights.”
ITCs, which include The Wave, Bar al Jissah, Muscat Hills Golf & Country Club and Jebel Sifa were brought in to capture the imagination of foreign investment – particularly with the included full residency rights that were not being offered in many other Middle Eastern states.
The timing was unfortunate and the problems of the world economy clouded any bright and sunny opportunities in Oman.
As Steel added: “There is little new development of residential space underway. Development is largely being carried out by local developers”.
Government backing
In fact, the talk of large-scale foreign investment is perhaps premature. As Gladwin pointed out, the market is still “very much an emerging real estate sector, which desperately needs upgrading”.
This is a point not missed by Oman’s ruling authorities who have invested considerably in the country’s tourism infrastructure.
“This is spearheaded by the international airport development,” said Gladwin. “The port redevelopment plans are coming to the fore. The ITC sector has also fuelled interest in diversification. The budget of $8bn between 2012-2015 is a clear indication of the government’s commitment to the sector going forward.”
However, while tourism developments are important, there are more concerns over how a rapidly growing Omani population will be catered to in the real estate sector.
“With 65% of the population under 16 years of age there will be a massive demand for housing in the medium term,” explained Steel.
“Developing affordable housing for this population will be a challenge for the country moving forward. Opportunities therefore follow that developers who can produce sustainable low cost housing will succeed.”
In order to achieve this, Steel said that new building technology was essential.
“Traditional construction methods are costly and outprice real estate in this price sensitive segment, and therefore other options need to be found like has been the case in central Europe and USA over the last 50 years,” he added.
So while the standard factors of oil revenue and the government’s willingness to invest remain paramount, Gladwin believed the global financial crisis had been weathered in Oman and he was optimistic about the future of the real estate sector in the Sultanate.
“Capital values are more transparent and this is an excellent platform from which to move forward,” he concluded.
