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
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Integrated Tourism Complex (ITC) Developments
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Residential Prices
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Residential Rents
12
Office Market Overview
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Retail Market Overview
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Disclaimer
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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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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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