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Bahrain real estate sector ‘bottomed out’

The real estate sector in Bahrain has ‘bottomed out’ in terms of rental rates and sale prices during the first quarter, and it is also clear that huge pent-up demand is waiting to cash in on the Bahrain upturn – when it happens, according to top property expert CBRE.

The ongoing political stalemate which is still evident in the Kingdom is making it difficult for the economy to move to the next phase of recovery from the global and regional economic downturn, said CBRE in its Q1 market review for the Kingdom.

It is unclear when this will take place, but talks between the various opposing parties in Bahrain’s political landscape are key to this topic and there is little indication that agreement or even meaningful discussions will take place in the short term, it added.

Ratings agencies Standard & Poor’s and Fitch remain reasonably sanguine about Bahrain, both currently allocating BBB ‘Stable’ sovereign ratings. The Kingdom has also received firm political and financial support from its GCC neighbours including the provision of a $10 billion ‘Marshall Plan’ financing initiative.

The government has started using this money to address a wide variety of infrastructure issues including roads, schools, hospitals, social and affordable housing and it is rumoured, possibly some of the stalled real estate projects, the report stated.

According to CBRE, the total value of real estate transactions in Bahrain grew by 46 per cent in 2012 compared to the year before. The biggest increase came from Bahrainis and non-GCC expatriates although the increase by expatriates was more due to the delayed registration of purchases they had made in previous years than new purchases, it added.

On the office sector, CBRE said it continued to remain stable. “Few movements have taken place in or out of the market and consolidation activities have virtually ceased. Rental rates are sitting at their effective bottom rate and those waiting for further falls are likely to be disappointed,” the expert stated.

Landlords have now reached their lowest rental rates and will not go any further than the point that they have already reached, even if this means their buildings will remain empty in the short term, it added.

“When the market starts to turn it is likely to experience a period of ‘soft growth’ as some slack in the system is taken up, but once we get through this, the lack of development over the last couple of years will mean that those entering the market looking for new space are going to be frustrated by lack of supply,” said the report.

The result at this point is likely to be sharp rental rate growth, but for now, this remains some way off,” it added.

In the investment sector, the last few years have been characterised by a significant mismatch between the expectations of buyers and sellers, said the CBRE report.

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