Oman Property Market Review

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Oman Property Market Review

FOREWORD Cavendish Maxwell is a highly respected independent firm of chartered surveyors and property consultants, focusing on property services throughout the Middle East and Africa. Established in 2008, Cavendish Maxwell is now one of the most influential property consultancies in the region. As a fully qualified member firm of the Royal Institution of Chartered Surveyors (RICS), and with extensive knowledge of the region, Cavendish Maxwell has the necessary experience, expertise and insight to deliver property advice of the highest standard. Our reports are used for loan security, audit, insurance reinstatement, dispute resolution, risk management, debt recovery, performance analysis, project financing, development strategy and government initiative implementation. We provide a comprehensive range of property services across all our departments, each of which is headed by highly skilled, experienced and fully qualified RICS chartered surveyors. Our various teams provide valuation, agency, advisory, plant and machinery valuations, capital investment, research and building consultancy services across all property types and sectors. Our Oman Property Market Review provides a summary of the residential, retail and office market as of March 2018, highlighting rent performance and factors impacting demand. The report also includes an overview of the freehold Integrated Tourism Complex (ITC) developments and outlook for the property sector in 2018.

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Oman Property Market Review

CONTENTS 4

Real Estate Activity

5

Tourism Overview - Oman

6

Integrated Tourism Complex (ITC) Developments

8

Residential Prices

10

Residential Rents

12

Office Market Overview

13

Retail Market Overview

14

Disclaimer

15

People

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Oman Property Market Review

REAL ESTATE

ACTIVITY

Oman’s GDP is expected to rise to 3.4% in 2018 and settle at 2.9% in 2019 from an estimated 0.1% for 2017, according to the World Bank.

The gradual recovery of oil prices alongside the introduction of natural gas production at the Khazzan Gasfield and the opening of a new Muscat International Airport are expected to improve confidence and encourage private sector investment in the country, thus bolstering Gross Domestic Product growth. Consequently, this is likely to boost the real estate sector performance in the country. Despite economic slowdown over the last two to three years, the contribution of the real estate sector to the Oman economy (GDP) continued to increase from 3.9% in 2014 to 5.2% in 2016. However, 2017 proved to be a challenging year for the sector as rents and price across all segments of the market, including residential, commercial and retail, declined against weakening demand. The latest figures released by the Ministry of Housing, Oman, indicate that the total value of property traded in the country during 2017 amounted to OMR 2.6 billion, down around 61% against 2016. Mortgage contracts registered the steepest decline of 74% from 2016 to OMR 1.4 billion in 2017. To boost investment in the Oman real estate sector, the Capital Market Authority (CMA) of Oman issued the regulatory framework for introduction and trading of Real Estate Investment Trusts (REITs) on the Muscat Securities Market in January 2017. The regulation opened the market to all Omani residents, including expats, allowing them to purchase a part of a real estate development in the Muscat Securities Market. This is expected to further boost real estate market activity.

Key Indicators for Real Estate Sector, Oman

Q4 2017 October

Traded value of the property in the Sultanate (OMR million)

6,622

218

177

128

524

2,609

-60.6%

Fees collected for all legal documents

66

7

6

5

19

79

20.1%

Traded value of sales contracts (OMR million)

1,027

105

77

64

246

1,140

11.0%

Sales contracts (numbers)

68,145

5,671

4,921

3,943

14,535

59,480

-12.7%

Traded value of mortgage contracts (OMR million)

5,583

112

99

64

274

1,448

-74.1%

Mortgage contracts (numbers)

22,608

1,588

1,416

905

3,909

18,619

-17.6%

Traded value of barter contracts

13

2

1

1

4

21

68.4%

Barter contracts

774

160

134

114

408

1,079

39.4%

230,403

21,743

20,677

16,273

58,693

225,468

-2.1%

1,912

105

80

88

273

1,211

-36.7%

Properties issued for GCC states citizens

Total

% change (2016-17)

2016

Properties issued (numbers)

November December

2017

Source: Ministry of Housing, Oman

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Oman Property Market Review

TOURISM OVERVIEW

OMAN

Oman is focusing on its tourism industry as a driver of economic growth.

Since the launch of the 2040 Tourism Strategy of Oman, the contribution of tourism to the Sultanate’s GDP increased to 2.8% in 2016, with year on year inbound tourists increasing to 3.3 million by December 2017, according to the National Centre for Statistics and Information (NCSI). Government initiatives are focused on boosting the sector’s contribution to GDP to 6%-10% in 20 years whilst creating more than 500,000 jobs through an investment of OMR 20 billion. One of the key initiatives to boost the sector’s contribution is the launch of e-visa services in July 2017, to enhance efficiency of the arrival process in Oman and the overall arrival experience. Further, it continues to promote Integrated Tourism Complexes (ITC) which are freehold areas that offer residence visas for those who buy properties in the country. The upcoming new international airport in Muscat, expected to open in 2018, is also likely to boost incoming tourism numbers to 21 million by 2035, up from eight million at the end of 2015, registering an annual growth rate of more than 5%, according to International Air Travel Association (IATA).

3,150

3,000

2,635

2,500

2,225

Number of inbound Tourists (‘000)

2,000 1,922 1,713 1,500

1,000

500

0 2012

2013

GCC

Source: NCSI, Oman

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2014

Other Arabs

Asian

2015

European

Other

2016


Oman Property Market Review

INTEGRATED TOURISM COMPLEX

(ITC) DEVELOPMENTS

Muscat City Centre

Muscat International Airport

Oasis Mall Muscat Zawawi Mosque Sultan Qaboos Grand Mosque

Qurum City Centre

Saeed bin Taimoor Mosque

Panorama Mall Mall of Oman

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Oman Property Market Review

As a part of its move to reduce the country’s reliance on oil and diversify the economy, the government of Oman has opened the real estate sector to investment from expatriates in Integrated Tourism Complexes (ITC). The ITCs are freehold mixed-use developments featuring different asset classes including residential, hospitality, retail, leisure and offices. Expatriates constitute 45% of the total population as of December 2017 and have historically had limited exposure to the property market. The government is developing more than 5,000 homes in collaboration with private developers in five ITC projects namely, Diyar Ras Al Hadd Resort, Omagine Project, Quriyat Integrated Project, Naseem Al Sabaah Project and Al Nakheel Project.

National Museum of Oman Ruwi Mosque

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Oman Property Market Review

RESIDENTIAL

PRICES

OMR 81,700 OMR 180,000 OMR 69,830

OMR 199,500 OMR 475,000

Mabela South OMR 21,850

OMR 171,000 OMR 190,000

OMR 26,600 OMR 31,980

The Wave

Al Khoudh OMR 60,000

Al Hail South

OMR 132,400 OMR 189,000 OMR 237,500

OMR 61,750 OMR 66,500

Muscat City Centre

Muscat International Airport OMR 475,000

Average Prices (in OMR) Apartment

Villa/Townhouse

1 BR Price

3 BR Price

2 BR Price

4 BR Price

3 BR Price

5 BR Price

Mall of Oman

Muscat Hills OMR 145,000 OMR 180,000

* Data as of March 2018 Source: Cavendish Maxwell Research

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Oman Property Market Review

Residential property rents and prices continue to decline in Oman and adjust to the economic slowdown. A combination of factors including readjustment of salaries and job losses in key sectors, as well as new project handovers are impacting demand. According to the latest figures released by the Ministry of Housing, the total value of property traded in the country during 2017 amounted to OMR 2.6 billion, down around 61% against 2016. Demand has also been hampered by the pressure on housing budgets resulting from taxation. Additionally, the oversupply of residential stock has provided buyers with more choice at competitive prices.

Qurum OMR 57,600 OMR 63,600 OMR 282,600

OMR 76,000

Ruwi

OMR 242,200 OMR 585.8

Azaiba OMR 75,000

Zawawi Mosque

Al Khuwair

OMR 147,200 OMR 161,500 OMR 70,000 OMR 76,000

Madinat Al Sultan Qaboos

OMR 57,900

OMR 66,500 OMR 83,600

Bawshar OMR 35,100 OMR 54,400 OMR 99,700

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Oman Property Market Review

RESIDENTIAL

RENTS

OMR 700 OMR 1,050

Al Hail North

OMR 300 OMR 350

OMR 380 OMR 570

OMR 2,230

OMR 400

OMR 480

Mabela South

OMR 430

OMR 1,430 OMR 1,480 OMR 2,230

The Wave

Al Khoudh

OMR 140 OMR 170

OMR 260

OMR 240

OMR 310

Al Hail South OMR 150 OMR 220 OMR 480

OMR 640 OMR 910 OMR 1,050

Muscat City Centre

Muscat International Airport OMR 1,520

Average Rents (OMR per month) Apartment

Villa/Townhouse

1 BR Rent/month

3 BR Rent/month

2 BR Rent/month

4 BR Rent/month

3 BR Rent/month

5 BR Rent/month

Mall of Oman

Muscat Hills OMR 670 OMR 860

* Data as of March 2018 Source: Cavendish Maxwell Research

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Oman Property Market Review

Continuous decline in rents have put tenants in a stronger position to negotiate terms with owners, who in turn are offering better rents and flexible lease terms. Landlords have also been offering three and six-month advance payments, as opposed to annual payments, to reduce vacancy risk on the property. Furthermore, housing demand is shifting towards more affordable housing causing a stronger rental decline in the premium locations. Tenants are migrating and showing a preference towards larger communities with a broader array of existing infrastructure and amenities being offered at affordable value. Rents are expected to fall further due to the government’s move for Omanisation through the imposition of a new expatriate law causing six months ban on expat visa issuance in 87 occupations, as well as residential project oversupply from previous years.

OMR 620 OMR 760

Qurum

OMR 1,330 OMR 2,120

OMR 330 OMR 390

OMR 620 OMR 960

Shatti Al Qurum

OMR 520

OMR 920

OMR 590

Azaiba/Ghubrah North OMR 270 OMR 440 OMR 670

Al Khuwair

OMR 670

OMR 540

OMR 1,050

Madinat Al Sultan Qaboos

Ruwi OMR 390

OMR 290

OMR 950

OMR 440 OMR 650

OMR 1,160

Bawshar OMR 270 OMR 400 OMR 390

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Oman Property Market Review

OFFICE MARKET

OVERVIEW

Mixed use developments to lead demand for offices.

Job cuts due to the economic slowdown have continued to put pressure on the office real estate market. Rents continue to decline, especially in central business districts (CBD). Tenants are becoming more sensitive to the location and quality of the property they rent, amenities being offered at the property and the price they are paying, giving rise to the development of new CBDs. Landlords who are responding proactively to the market conditions by offering competitive rents for the high quality properties are witnessing quicker absorption and higher occupancy levels. The performance of the office market is expected to be largely driven by a combined effect of economic diversification and development of sectors other than oil and gas, as well as accessibility and amenities such as parking facilities being offered. The mixed-used developments featuring a combination of residential, office and retail developments are further likely to underpin the performance of the country’s real estate sector as they offer competitive prospects to both the developers as well as tenants. These master developments have started to attract an increasing number of tenants by offering better quality of life, reduced commute times to work and offering accessible retail outlets.

Office Rents in Key Areas (OMR per sqm)

Qurum

OMR 6-8 per sqm

Shatti Al Qurum OMR 6-8 per sqm

Azaiba

OMR 6-8 per sqm

Qurum City Centre

Oasis Mall Muscat Zawawi Mosque

Al Khuwair

Ghubrah

OMR 4-6 per sqm

OMR 6-8 per sqm

Saeed bin Taimoor Mosque

Sultan Qaboos Grand Mosque

Panorama Mall

Ghala

OMR 4-6 per sqm

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Oman Property Market Review

RETAIL MARKET

OVERVIEW

The retail market is in transition given the changing shopping preferences and habits of consumers.

Despite weaker consumer sentiment and declining retail sales due to poor market conditions, a significant amount of retail space is being added to the existing stock in the country, mainly in the capital city. The retail landscape of the country is gradually shifting towards larger format malls from standalone retail outlets, owing to changing shopping preferences of the population. The consumers now look forward to a holistic shopping experience combined with leisure and entertainment. In 2018 two new malls from Landmark Group, branded Oasis Malls, in Sohar (33,000 sqm) and Salalah (35,000 sqm), as well as Majid Al Futtaim’s My City Centre Sur and City Centre Sohar, among others, are expected to be added to the supply.

Retail Rents in Key Locations (OMR per month)

Mabela

OMR 200-400

Al Khoudh OMR 200-400

Mawaleh South OMR 300-400

Muscat City Centre

Shatti Al Qurum OMR 680

Qurum City Centre

Ruwi

OMR 400-700

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Muscat International Airport

National Museum of Oman

Ruwi Mosque

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Oman Property Market Review

DISCLAIMER This report may not be reproduced, either in whole or in part, nor altered in any way, without the prior written consent of Cavendish Maxwell. The information and analysis contained in this report has been obtained from or is based on information from a variety of sources generally regarded to be reliable and assumptions which are considered reasonable, and which were current at the time of undertaking market research. However, no representation is made, or responsibility accepted by Cavendish Maxwell or Property Monitor, in respect of the accuracy or currency of this information. Potential investors or developers are encouraged to carry out their own assessment of market potential and investment returns. It should be noted that the estimation of future sales prices, rental levels, development and investment returns and development viability is a very problematic exercise which at best should be regarded as an indicative assessment of possibilities rather than absolute values. The process of making forward projections for such key elements involves assumptions which are acutely sensitive to changing conditions, variations in any one of which factors may significantly effect the viability of a project and we draw your attention to this factor. 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.

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Education Advisory and Valuation

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Oman Property Market Review

PEOPLE Jay Grant MSc IRRV (Hons)

Nigel Armstrong FMAAT

E: jay.grant@cavendishmaxwell.com

E: nigel.armstrong@cavendishmaxwell.com

Miles Phillips BSc (Hons) MRICS

Head of Oman

Founder and Chairman

Senior Partner

E: miles.phillips@cavendishmaxwell.com

Chief Executive Officer

Khalil Alzadjali

E: khalil.alzadjali@cavendishmaxwell.com

Manika Dhama BA (Hons), MBA

Sofia Underabi MRICS AAPI

E: manika.dhama@cavendishmaxwell.com

E: sofia.underabi@cavendishmaxwell.com

Paul McCambridge

Paul Barker BSc (Hons) MRICS

E: paul.mccambridge@propertymonitor.ae

E: paul.barker@cavendishmaxwell.com

Senior Consultant Strategic Consulting and Research

Head of Sales Property Monitor

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Partner Head of Residential Valuation

Partner Head of Commercial Valuation


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