Saturday 18 / May / 2024
Muscat: The recent Financial Stability Report 2023 of the Central Bank of Oman (CBO) has underlined the resurgence of economic activities leading to a recovery in the real estate market and added that housing rents remain affordable due to abundant supply.
Reacting to the report, one of the leading real estate developers in Oman, Syed Fayyaz Group (SFG) Chairman Sheikh Fayyaz Ali Shah said, “Housing rents in Oman remain to be one of the most affordable given the quality of life the Sultanate of Oman offers. There has been an uptick in the demand but with large availability, the rents remain affordable.”
SFG has been developing and managing real estate in Oman since 1976. The group currently manages approximately 700 residential units in Muscat, along with various other types of properties.
Shah said: “Rents in Muscat when compared to other cities in the region are much more affordable. Muscat provides greater opportunities for individuals to save money and maintain a positive work-life balance. Traditionally, real estate ownership has been an excellent platform to preserve wealth and generate cash flow. Although rents are considered affordable in Muscat, I find this to be reflected in the valuation of lands. Thus, as a real estate developer, I am very pleased with the returns that our rental portfolio generates.”
He added: “We are blessed to have an average occupancy of over 90 percent over the past five years, despite many challenges such as the pandemic. I feel that this is because there is still a lack of professionally managed buildings, where tenants can feel comfortable to stay over many years. Our aim is to develop high quality living and maintain affordable rents.”
Shah said: “With a rise in population over the next decade, rents in Muscat will gradually increase. There has also been greater awareness of Oman across the globe as a peace-loving nation and we do get regular inquiries from overseas to settle or relocate in Muscat. I am grateful to His Majesty Sultan Haitham bin Tariq and the Government of Oman for shaping the country with its distinctive identity. Oman’s lifestyle remains truly unique, despite going through significant growth and diversification as we work towards Vision 2040.”
Another real estate developer of a leading gated community in Muscat said: “What the properties offer and the rent sought is very balanced and affordable when we compare to other major cities around the region. The return of expatriates’ workers after the pandemic was controlled has certainly played a significant role in our upward revision of rents. Still, the housing rents are far more affordable in Oman.”
The CBO report also attributed the rise in the expatriate population to pre-pandemic levels as one of the main reasons for the real estate recovery.
The CBO noted: “The real estate market in Oman began to pick up in 2022 amid the improvement in economic conditions. The recent recovery in the population profile from the pandemic has eased some segments of the Omani real estate market, reviving the demand for real estate properties.”
It added: “The expatriate population, a major user of rental residential properties, rose by 8 percent in 2022 compared to the beginning of the pandemic year 2020. The resumption of commercial activities after the pandemic and the increase in the number of Omanis joining the workforce has resulted in the recovery of economic activities, and rebooted the demand for property.”
As per the CBO estimates, residential property prices inched up on average by 7 percent during 2022, with the residential real estate index recovering from its lows in 2021.
“The resurgence of economic activities following the pandemic, coupled with favourable oil prices, has led to a gradual uptick in property prices. This can be attributed, to some extent, to a recovery in the labour market, where the demand for workers has increased, resulting in a higher number of expatriates employed in Oman,” added the CBO report.
‘However, despite these developments, housing rents still remain affordable due to abundant supply,’ the central bank added.
The property transactions (value of the traded property) that experienced a sharp decline at the onset of the pandemic gradually recovered in the latter part of 2021, and this positive trend persisted throughout 2022, the CBO said.
‘Overall, the property market in Oman appears to be recovering amid the resurgence of economic activity. Hence, we do not foresee any imminent correction in the real estate prices,’ the central bank noted.
CBO has also recently authorised finance and leasing companies to lend for commercial real estate projects, besides lending to real estate developers. This additional source of financing will further bolster the real estate sector in Oman.
According to the CBO, the banking sector in Oman is exposed to the real estate market with a total direct and indirect real estate exposure of over one-third of their lending portfolio.
Within this real estate exposure, residential mortgages formed around 17.1 percent of lending in 2022. In addition, commercial real estate exposure formed around 3.6 percent of the total lending portfolio.
CBO said: “The risk of the banks’ real estate exposure remains low as 90 percent of the mortgage loans are for the primary residence of the borrowers and around half of the total real estate exposure is against a well-diversified lending portfolio (indirect exposure where real estate is held as primary or secondary collateral).”
