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Qatar's residential property market is encountering a period of slowdown, leading to concerns about an oversupply of new properties. The growth momentum has stalled, causing a decline in rents across popular districts, most notably in Lusail's Waterfront and Fox Hills. These areas have witnessed substantial drops in average quoted rents for apartments, with Lusail experiencing a staggering 23% quarterly depreciation and Fox Hills facing an 18% decline, according to property consultancy firm Knight Frank.
This sharp decline in rents is expected to exert pressure on landlords to remain competitive. Knight Frank's "2023 Destination Qatar" report reveals that Qatari high-net-worth individuals are particularly inclined towards acquiring residential properties in Lusail, with an average budget of $1.8 million. However, the property market has been impacted by several factors, including the aftermath of the FIFA World Cup held late last year. In the lead-up to the event, Qatar witnessed a surge in construction, resulting in the addition of tens of thousands of new homes.
The market is grappling with a significant supply-demand imbalance, coupled with rising interest rates and affordability challenges. These issues are collectively contributing to a shrinking mortgage market and influencing both the volume of home sales and the overall residential property values. Over the past year, the total number of residential sales transactions has seen a decline of 36%, while the total value of residential transactions has dropped by 24%, states Faisal Durrani, Partner and Head of Research for the Middle East and North Africa at Knight Frank.
Despite these challenges, Qatari developers are hopeful that certain factors could once again become favourable, potentially boosting growth in home sales or rentals. The country's economy remains stable, benefiting from favourable energy prices. Among high-net-worth individuals surveyed, 71% already own a home in Lusail. Notably, Lusail Marina and Lusail Waterfront are identified as the two most preferred locations for residential real estate acquisition among this demographic.
In essence, Qatar's residential property market is navigating a period of stagnation, driven by an excess of new supply and exacerbated by the post-FIFA World Cup cooldown. The imbalance between supply and demand, alongside rising interest rates and affordability issues, is constraining the mortgage market and affecting property sales and values. While challenges persist, the positive economic landscape and preferences of high-net-worth individuals suggest that there remains potential for a turnaround, particularly in coveted areas like Lusail.
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