Strong Real Estate Sector Despite All the Challenges: Qatar Shows Us How

Qatar — that little country in the Persian Gulf — is a power player with a lot of money and ambition, even on the real estate sector stage. In just 50 years this tiny Middle Eastern nation has gone from a poor pearling and fishing country to an oil giant with one of the highest per-capita gross domestic products (GDP) in the world. Alongside the rapid population growth, these factors contribute to making the Qatari real estate market one of the most successful markets in the region, either in residential, commercial, or retail real estate. However, a few years ago the situation in the Qatari real estate sector was not so vibrant. At that time, Qatar had to face a diplomatic, trade, and transport boycott imposed by Saudi Arabia, the United Arab Emirates, Bahrain, and Egypt over allegations that Doha supports Islamist terrorist groups. Jason Tuvey, an economist at Capital Economics, an economic research consultancy based in London, noted that “Qatar’s property sector has been one of the main casualties from the blockade that was imposed in mid-2017.“ But it didn’t stop Qatar from becoming worldwide famous for its architectural masterpieces, such as the Pearl-Qatar, Msheireb Downtown Doha, Lusail City, and various other projects. It also managed to come at the forefront for adapting ‘proptech’ — an emerging field that implements the use of technology in real estate to produce the best results. With its National Vision 2030, Qatar is on its way to becoming a role model for sustainable urban living. Eco-friendly and smart high-tech buildings are trending in the Qatari real estate market right now, and as the real estate projects are executed in a short duration without compromising on quality, Qatar also demonstrates its commitment to be ready for the 2022 FIFA World Cup. To be more specific, in the few upcoming years Qatar has to increase its residential space by about 50 percent and office space by 40 percent due to expected demand from the World Cup, according to a report by DTZ, the longest established global real estate advisor in Qatar. FIFA requires Qatar to have at least 60 thousand hotel rooms in place for the month-long tournament, which is estimated to draw about 1,5 million fans to Qatar — more than half of its roughly 2,8 million population. The biggest number of new buildings will be constructed in Lusail City — the coastal metropolis located 16 kilometers from Doha, which is being developed by a state-controlled Qatari Diar real estate company. The project was initially conceived back in 2005, but development truly took off when Qatar was announced as the host of the 2022 FIFA World Cup. Also known as one of the largest commercial projects in the Middle East, Lusail City is a futuristic green city project, which is expected to be completed by 2022. It will hold the largest stadium by capacity at the first FIFA World Cup hosted in the

Gulf, and after the global finals stadium’s infrastructure will be converted into a community space, including schools, shops, cafes, sporting facilities, and health clinics. Let’s look at Qatar’s real estate sector numbers real quick. In 2017, the total value of the real estate transactions in Qatar reached $32,7 billion — a 20 percent higher number than in 2016. However, in 2018, as both public and private sectors started adapting to previously mentioned regional geopolitical challenges, the total value of the real estate transactions recorded a significantly lower number — $19,7 billion. Something needed to be done to stabilize the situation. “If you are going to be subject to a blockade, then you better have a lot of money,“ one banker told Reuters at that time. Searching for a solution, in the early months of the crisis, Qatar liquidated nearly $3 billion in US treasury investments and drew down over $40 billion in foreign reserves to support its currency and banks. The economy has stabilized, growing 2,2 percent year-on-year in the third quarter of 2018. Qatar’s banks have been replenished by foreign deposits replacing much of the Saudi and Emirati money that left, and its stock market was the top performer in the Middle East that year. Then, keeping in mind that foreign citizens account for 75 percent of its population, Qatar opened its real estate sector to foreign investors by easing restrictions on property ownership. At that time, Pawel Banach, General Manager at ValuStrat Qatar, the Middle East’s leading consulting group, noted that “The recent reform to change freehold ownership law will contribute to a positive transformation of the real estate sector which will now embrace its cultural diversity through new initiatives designed to encourage investments and positively change business perspectives to ultimately result in overall economic growth.“ And he was right — as the combined value of real estate transactions in 2019 reached $22,8 billion, reflecting the strong interest of investors in Qatar’s growing market. Today, the Qatari real estate sector is considered to be one of the most important pillars of the economy of the country. Mohamed Amer, General Manager at Al Hattab Holding, one of the leading construction companies in its classification, noted that “Qatar’s real estate market is more robust and vibrant compared to other markets in the region. The market volatility over the last couple of years was temporary, understandably due to some apprehensions among investors about the geopolitical situations, which had some impact in 2018, but now things are much better and demand is picking up which is expected to be accelerated in the immediate future.“ Interestingly, as many economies and markets around the world are suffering the far-reaching aftereffects of the Covid-19 right now, Qatar refused to join this list. According to a new report by the real estate company Al-Asmakh Projects, which was released at the very end of March 2020, the effects of the Coronavirus pandemic on the real estate sector in Qatar in terms of market demand are “limited”. The report also noted that Qatar’s real estate sector “is strong, durable and able to overcome this crisis, supported by the precautionary measures and measures taken by the government, in addition to its association with a system of real estate laws and legislations, as well as modern regulations for this sector that have proven a positive impact on its performance.” But perhaps we shouldn’t be surprised about this. All in all, as we’ve seen from history, during these past years, the Qatari real estate sector was able to overcome the global and regional crisis — and was emerging from it stronger than before.