AND REVIEW OF 2O18
BAHRAIN 2019 PROPERTY MARKET REPORT AND REVIEW OF 2018
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CONTENTS 04
Macroeconomic Overview
04 08
Residential Market Overview
11 04
Office Market Overview
13 04
Industrial Market Overview
06
Bahrain Infrastructure Projects
10
Retail Market Overview
12
Hospitality and Leisure Market Overview
14
A Word From Our Chief Economist
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BAHRAIN 2019 PROPERTY MARKET REPORT AND REVIEW OF 2018
FOREWORD With oil responsible for over 80% of its revenues, the Kingdom of Bahrain was perhaps the worst hit among GCC counties by the oil price collapse of 2014. As a result, the country’s fiscal deficit ballooned and debt levels rapidly increased, reducing the ease with which further debt could be raised. To avert a potential debt crisis, neighbours Saudi Arabia, Kuwait and the UAE pledged a BHD 3.77 billion aid package to Bahrain in late 2018. In addition, Bahrain has undertaken several reforms and diversification efforts to return to fiscal stability by 2022. These included implementing Value Added Tax (VAT) at 5%, providing a voluntary retirement plan for government workers, curbing public expenditure, and ramping up non-oil revenues. Increased infrastructure spending has supported diversified sector expansion in recent months, with financial services, manufacturing and construction contributing the most to non-oil GDP growth. A continued focus on implementing infrastructure projects going forward is expected to further bolster diversified growth for the economy. Against this backdrop, we explore in our maiden report on the Bahrain property market, the performance of the residential, retail, office, industrial and hospitality sectors in 2018, until H1 2019. Residential property prices and rentals across all four Governorates displayed a general trend of decline. The weakness extended to commercial office space which is faced with the dual challenge of subdued demand and oversupply. Prices have also been impacted by reforms such as the implementation of Real Estate Regulatory Authority (RERA) rules, and a delicate geo-political situation in the region. On the other hand, helped by tourism, the retail sector continues to attract investment which is evident in the capacity growth observed over the last decade. The region’s healthy tourism industry is also driving growth in the hospitality and entertainment space, with increasing demand witnessed amongst user groups for four- and five-star hotels and serviced apartments, and high-quality and mid-range three-star accommodation.
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BAHRAIN 2019 PROPERTY MARKET REPORT AND REVIEW OF 2018
MACROECONOMIC OVERVIEW According to data from the Information and eGovernment Authority, between 2010 and 2018, Bahrain’s GDP grew from BHD 9.7 billion to BHD 14.2 billion. Mining, financial services and manufacturing were the top three contributors to GDP growth. In the last quarter of 2018, Bahrain’s economy recorded real growth of 4.6% and 6.5% in current prices versus the same period a year ago, with Bahrain’s Ministry of Finance and National Economy estimating growth for the whole year at 1.8%. Mirroring this trend, Bahrain’s economy is expected to grow 2.3% in 2019 and 2.7% in 2020. The expansion is expected to be supported by the 5-year aid package worth BHD 3.77 billion that was committed to Bahrain by allies Saudi Arabia, Kuwait and the UAE, and a fiscal balance programme Bahrain released to adjust its finances. As of May 2019, Bahrain had already received the first tranche of the aid package amounting to approximately BHD 1.1 billion. Data from the first half of 2019 is already displaying a healthy outlook for the rest of the year, with higher exports and robust private sector credit growth benefiting the non-oil sector. Construction activity continues to fuel expansion, while oil production also likely increased in annual terms in H1. Bahrain’s position also improved on the World Bank’s Ease of Doing Business ranking in 2019 to 62 from 66 in 2018, reflecting the heightened efforts by the country to attract foreign investment and stimulate entrepreneurship.
TOTAL GDP 2010 - Q1 2019 (BHD BILLION)
GDP BY SECTOR Q1 2019
16.0 14.0
16.8%
40.6%
12.0 BHD billion
10.0
14.1%
8.0 6.0
7.4%
4.0
16.8%
4.3%
2.0 0
Q1 2019
2018
2017
2016
2015
2014
2013
2012
9.9 10.3 10.8 11.3 11.6 12.1 13.3 14.2 3.5 2011
2010
9.7
Mining
Real Estate
Manufacturing
Financial Services
Construction
Others
Source: Information and eGovernment Authority 44
BAHRAIN 2019 PROPERTY MARKET REPORT AND REVIEW OF 2018
GDP PER CAPITA IN 2017
GDP PER CAPITA 20,000 BHD
In 2017, Bahrain’s GDP per capita was BHD 8,951, 5% higher than in 2016, indicating a slightly higher standard of living among residents.
15,000 10,000 5,000
According to data from the World Bank, GDP per capita in Bahrain is in the 39 th position of 196 countries.
15,345
10,950
8,951
7,861
5,757
UAE
Kuwait
Bahrain
KSA
Oman
Source: World Bank
FDI BETWEEN 2014 AND 2017
FDI BETWEEN 2014 AND 2017 Between 2014 and 2017, FDI increased from BHD 9,680 million to BHD 10,333 million registering CAGR of 2%, as a result of higher capital flows and Bahrain’s efforts in attracting foreign investment. Around 68 countries contributed to the inward stock of FDI in Bahrain at the end of 2017 compared to 63 countries in 2016.
BHD million
10,500
The financial sector accounted for the biggest chunk of inward FDI into Bahrain at 75.5%, with manufacturing accounting for 12.4%.
10,000 9,500 9,000 9,680
9,705
9,796
10,333
2014
2015
2016
2017
Source: Information and eGovernment Authority
POPULATION OVERVIEW According to the Bahrain Open Data Portal, Bahrain’s population increased by 3% between 2007 and 2018, reacing 1.5 million, 49% were Bahraini while expats comprised the remaining 51%.
1,503,091
1,501,116
1,423,726
1,370,322
1,314,562
1,253,191
1,208,964
1,195,020
1,228,543
1,178,415
1,103,496
1,039,297
During the same time period, male population registered a compound annual growth rate (CAGR) of 3.7% while the female population grew at a CAGR of 2.9%.
CAGR 3%
1,600,000
556,227
549,804
535,337
523,957
508,075
464,810
448,515
453,537
464,186
446,418
800,000
426,906
1,000,000
407,223
1,200,000
764,357
741.483
760,449
788,381
806,487
846.365
888,389
951,312
946,864
200,000
731,997
400,000
676,590
600,000 632,072
Population
1,400,000
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Bahrain Open Data Portal
Female
Male
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BAHRAIN 2019 PROPERTY MARKET REPORT AND REVIEW OF 2018
BAHRAIN INFRASTRUCTURE PROJECTS As the economy diversifies away from hydrocarbons, infrastructure continues to be one of the major drivers of economic growth in the region. A BHD 12.1 billion infrastructure investment pipeline comprised of BHD 3.77 billion in government funding, BHD 2.8 billion from the GCC Development Fund, and BHD 5.65 billion from the private sector, has given a boost to construction and supporting industries. Project activity in GCC-funded projects alone has seen a major uplift, with the cumulative total active projects rising by 16.3% year-onyear.
The government has approved a number of major projects, including: A sixth production line at Aluminium Bahrain (ALBA) valued at BHD
Roads and sewerage projects valued at BHD 339 million
1.32 billion and an associated BHD 301 million power station project
Gulf rail line development
An airport expansion project valued at BHD 410 million
Public transport network (due in 2030)
A BHD 133 million gas plant
Infrastructure for three planned cities
Major housing projects valued at BHD 820 million
A new exhibition centre
Electricity and water projects valued at BHD 410 million
Industrial development
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BAHRAIN 2019 PROPERTY MARKET REPORT AND REVIEW OF 2018
UPCOMING INFRASTRUCTURE PROJECTS
2019 New Passenger Terminal, Bahrain International Airport The expansion work of the existing terminal includes: 4,600 square metres departures hall Two premium class check-in halls 24 passport control booths 28 security lanes 9,000 square metres duty-free retail, food and beverage (F&B) zone Airline premium class lounges 24 jetty served departure gates
2022 Bahrain Petroleum Company (BAPCO) Refinery Modernisation Upgrade to enable total refinery throughput to increase to a maximum of 380,000 barrels per day (bpd). Refinery’s capacity to increase 42% from the existing 267,000 bpd
2025 King Hamad Causeway (Dammam - Bahrain Causeway) Water bridge connecting Bahrain and Saudi Arabia to stretch over 25 km Causeway expected to include two lanes for trains and one lane for cars
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BAHRAIN 2019 PROPERTY MARKET REPORT AND REVIEW OF 2018
RESIDENTIAL MARKET OVERVIEW Bahrain offers numerous residential options ranging from villas to apartments, both within and outside compounds. The most popular locations to buy or lease a residential apartment in Bahrain are Al Juffair, Amwaj Island, Seef, Reef Island and Manama. Buying and leasing villas in Bahrain, Amwaj Island, Saar, Al Riffa and Janabiya are the most popular. The year 2018 has marked several changes for the real estate market. Multiple development projects are underway, regulations have undergone an overhaul with the implementation of Real Estate Regulatory Authority (RERA) rules, and the geo-political situation has changed drastically in the region. All of these developments have naturally driven a change in prices. During 2018, rents and sale prices for apartments and villas in all four Governorates displayed a general trend of decline. Meanwhile, demand for affordable properties continued.
APARTMENTS SALES PRICE AND ANNUAL RENT
Seef SALES PRICE BHD 34,000 – 420,000 Studio – 4BR
ANNUAL RENT BHD 3,000 - 21,000 Studio – 4BR
Reef Island SALES PRICE BHD 95,000 – 330,000 1BR – 4BR
ANNUAL RENT BHD 5,400 - 30,000 1BR – 4BR
Amwaj Island SALES PRICE BHD 48,000 - 270,000 1BR – 4BR
Al Juffair SALES PRICE BHD 28,700 – 185,000 Studio – 3BR
SALES PRICE FOR APARTMENTS
88
ANNUAL RENT BHD 3,000 - 19,200 Studio – 3BR
ANNUAL RENT BHD 3,600 - 20,000 1BR – 4BR
BAHRAIN 2019 PROPERTY MARKET REPORT AND REVIEW OF 2018
VILLAS SALES PRICE AND ANNUAL RENT Amwaj Island Al Janabiya SALES PRICE SALES PRICE BHD 142,000 – 400,000 3BR – 5BR
ANNUAL RENT
BHD 140,000 – 780,000 2BR – 7BR
BHD 6,000 – 30,000 3BR – 5BR
ANNUAL RENT BHD 6,000 – 42,000 2BR – 7BR
Saar
SALES PRICE BHD 120,000 – 600,000 2BR – 7BR
ANNUAL RENT BHD 6,000 – 36,000 2BR – 7BR
Al Riffa SALES PRICE BHD 150,000 – 750,000 2BR – 5BR
ANNUAL RENT BHD 6,000 – 30,000 2BR – 5BR
UPCOMING PROJECTS Diyar Al Muharraq Bahrain Bay AL RIFFA Villamar Towers
Seven man-made islands on the northern shores of Muharraq with residential, commercial, and retail spaces Three islands with residential, commercial, and retail spaces Three towers in the Financial Harbour with residences, restaurants, health clubs and spas
AL RIFFA East Hidd Housing Development
Residential units and plots
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BAHRAIN 2019 PROPERTY MARKET REPORT AND REVIEW OF 2018
RETAIL MARKET OVERVIEW Bolstered by tourism, retail continues to be one of the kingdom’s most stable sectors, recording consistent capacity growth over the past decade. Tourism has largely been driven by efforts of the Bahrain Tourism and Exhibitions Authority (BTEA), which has developed a year-long calendar of retail and entertainment events to position Bahrain as an attractive retail and holiday destination. Historically, it has mostly been the large to medium-sized malls housing international brands, department stores and supermarkets which attract residents of Bahrain and visitors from nearby Saudi Arabia. According to statistics from the fifth edition of Shop Bahrain - the retail festival held by the BTEA - a record number of 145,256 transactions totaling BHD 19 million were registered in 2018, compared with over 130,000 transactions totaling BHD 8 million in 2017. The retail sector continues to attract interest and investment with the construction of at least three malls underway and scheduled for completion over the next few years.
Marassi Galleria
Dilmunia Mall
Moda Mall Seef Mall
The Avenues Mall Bahrain
The Bahrain Mall
Bahrain City Centre
Bahrain Outlet Mall
Major Malls
10 10
Upcoming Malls
BAHRAIN 2019 PROPERTY MARKET REPORT AND REVIEW OF 2018
OFFICE MARKET OVERVIEW Office market activity in Bahrain has been subdued over the years on account of the twin factors of oversupply and tepid demand. The years 2001-2007 saw construction activity at a fevered pace followed by a drop in demand post 2008 when Bahrain truly felt the ramifications of the global economic crisis. Lacklustre demand continues for commercial space with interest mainly observed for small, fitted units which require minimum investment from tenants. Among commercial locations, Seef and Manama are Bahrain’s central business districts. Mahooz, Sanabis and Umm Al Hassam, which are located within Manama, are also considered as commercial locations. While steep rental declines ceased in 2018, the market has still not returned to a state of rental growth.
MONTHLY OFFICE RENT BY SIZE
Seef MONTHLY RENT BHD 179 – 3,500 30 - 700 sq m
Manama MONTHLY RENT BHD 135 – 4,600 10 - 750 sq m
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BAHRAIN 2019 PROPERTY MARKET REPORT AND REVIEW OF 2018
HOSPITALITY AND LEISURE MARKET OVERVIEW In 2016, the Kingdom of Bahrain launched its new tourism identity under the slogan of ‘Ours. Yours. Bahrain’, to further develop the tourism sector as a key contributor to the national economy. The campaign aims to highlight the unique experiences Bahrain has to offer, underpinned by the warmth and hospitality of its people. After the launch of the campaign, tourism numbers received a boost with visitors in 2018 rising 6% over 2017 at 12.8 million. The kingdom aims to grow visitor numbers to 15 million over the next four years. Bahrain also offers outdoor leisure activities popular among locals and expats alike, including dolphin watching, fishing, sailing and scuba diving. Together, these offerings are aimed at driving demand for its holiday accommodation options. Currently, Bahrain has 101 hotels, 81 hotel apartments and 11 resorts. Demand continues to grow for four- and five- star hotels along with serviced apartments for larger families. However, high-quality and mid-range three-star accommodation is also in demand among leisure and business travellers. The tourism industry’s revenue is expected to hit approximately BHD 377 million by 2020 .
210
263
128
This positive outlook comes despite current trends, which show that occupancy levels have been under pressure over recent years, and may continue in future as more supply opens up.
Hilton Bahrain BayHotel & Residences Vida Hotel & Residences At Marassi Al Bahrain
Wyndham Grand Manama
160
Staybridge Suites Hotel
166
175
112
Ramee Grand Hotel and Spa
201
One & Only Resort
The Address Hotel
The Grove Hotel & Conference Centre Bahrain
B a h ra i n a l s o a t t ra c t s s eve ra l v i s i to r s f ro m neighbouring Saudi Arabia for day-trips. However, the latter’s efforts in developing its own tourist attractions to retain residents while attracting foreign visitors will likely have an impact on Bahrain’s tourism and hospitality industry.
Bahrain Marina Shangri-La Hotel 250 468
Gulf Hotel Bahrain Convention & Spa
Popular Hotels
Keys
Upcoming Hotels
Marassi Galleria entertainment Lost Paradise Of Dilmun Water Park Dive Park
Wahooo! Waterpark
Gravity Indoor Skydiving
Bahrain National Museum
Bahrain International Circuit
Bahrain Yacht Club
Jufair Square Adhari Park
Prince Khalifa Bin Salman Park
Existing Entertainment and Leisure Projects
12 12
Upcoming Entertainment and Leisure Projects
BAHRAIN 2019 PROPERTY MARKET REPORT AND REVIEW OF 2018
INDUSTRIAL MARKET OVERVIEW Apart from being tax exempt, features such as zero custom duties, no requirement to hire staff, and 100% foreign ownership in most industries make freezones in Bahrain attractive investment options. Bahrain has three central free trade zones, namely Bahrain Logistics Zone (BLZ), Bahrain International Airport (BIA), and Bahrain International Investment Park (BIIP). Measuring 1 sq km, BLZ is the only customs-free logistics park in Bahrain with bonded and non-bonded areas. While BIIP is ideal for large manufacturing operations, BIA specialises in cargo sales, trans-shipments, break-bulk cargo handling and customs clearance.
BAHRAIN’S FREE TRADE ZONES
Bahrain Airport Zone (BIA)
Bahrain Logistics Zone (BLZ) Bahrain International Investment Park (BIIP)
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BAHRAIN 2019 PROPERTY MARKET REPORT AND REVIEW OF 2018
A WORD FROM OUR CHIEF ECONOMIST Investors in Bahrain have always known that they have to keep a watch on three different fronts. First, and most important, the overall political and economic situation; the two are inextricably linked. The GCC Development Fund support package agreed last year has undoubtedly helped, but the government must strike a difficult balance between the need to constrain spending and its overriding responsibility to maintain the political improvements that have characterised the kingdom over the past seven years. The International Monetary Fund (IMF) is optimistic—they expect economic growth to remain around 1.8% this year and have commended the government’s Fiscal Balance Programme and the 2019-20 budget. The introduction of VAT in January 2019 , with new builds zerorated, a gradual move to cost recovery in utilities, eventual reduction in subsidies and a voluntary retirement plan, are all expected to further reduce the fiscal deficit over the medium term. Although, public debt will continue to increase in absolute terms and the government is understandably reluctant to move on subsidies. Taken together, however, there should be no medium-term threat either to the currency peg or to the government’s hard-won political achievements . Second, the diversification of the economy, which can be measured by the achievements of the Bahrain Economic Vision 2030. The IMF notes Bahrain’s leadership in fintech, but more important is the current wave of infrastructure projects worth over BHD 12 billion, including the new airport terminal. The kingdom’s strong position in industries as diverse as aluminium and health care, downstream oil and gas, and food, are all positive, and mostly counter-cyclical investments. In addition, the country announced a major gas field discovery in April 2018—an estimated 81 billion barrels of oil and 14 trillion standard cu ft of gas. Third, the real estate sector. Prices in Bahrain have remained resolutely lower than their counterparts elsewhere in the Gulf, but this gap might well narrow in the medium term if the government can achieve both compatibility with the IMF and success with the 2030 Economic Vision. But that market growth will come with an important consequence for the real estate market. Everything points to the importance of differentiation between areas becoming more important for investors. In coming years, new names such as Dilmunia, Bilaj Al Jazayer, and Sa’ada, will join existing locations such as Amwaj Island, Saar, Al Riffa and Janabiya to become as distinct from one another and as familiar as their equivalents elsewhere in the Gulf. As this report has already indicated, their relative success will undoubtedly differ: drilling down to the demand and supply factors that influence each of them will be key to both capital growth and rental return as Bahrain becomes not just one market, but many.
JULIAN ROCHE CHIEF ECONOMIST
1
Kingdom of Bahrain (2018) VAT General Guide. Version 1.3 Updated 29 January 2019. https://www.nbr.gov.bh/pdf/20190116_VAT_General_Guide_v1_3.pdf IMF (2019) IMF Staff Completes 2019 Article IV Mission to Bahrain. https://www.imf.org/en/News/Articles/2019/03/05/pr1965-bahrain-imf-staffcompletes-2019-article-iv-mission 2
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BAHRAIN 2019 PROPERTY MARKET REPORT AND REVIEW OF 2018
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Disclaimer: The information and analysis contained in this report is based on information from a variety of sources generally regarded to be reliable, and assumptions which are considered reasonable, and which was current at the time of undertaking market research, but no representation is made as to their accuracy or completeness. We reserve the right to vary our methodology and to edit or discontinue the indices at any time, for regulatory or other reasons. The report and analysis do not purport to represent a formal valuation of any property interest and must not be construed as such. Such analyses, including forward-looking statements are opinions and estimates only, and are based on a wide range of variables which may not be capable of being determined with accuracy. Variation in any one of these indicators can have a material impact on the analysis and we draw your attention to this. Cavendish Maxwell and Property Monitor do not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this report.