Demand for housing in Oman forecasted to increase

OMAN: Demand for housing is forecasted to increase in Oman as the number of foreign professionals employed in the Sultanate is expected to increase with the new five-year development plan by the government, according to a report by the Oxford Business Group (OBG) on Thursday, Jan 27.

The government plans to spend US$78 billion (RM237.9 billion) over the coming five years in a series of investment programmes aimed in part at reducing dependence on hydrocarbons by building up other industries and expanding infrastructure, while also bolstering social services and support for the private sector, the report said, adding that the investment package is expected to have a significant impact on the country's real estate sector by increasing both demand and private spending power.

Cluttons strategic consultant Matthew Wright was quoted to have said in January that the high level of investment in infrastructure will directly lead to an increase in real estate activity in the industrial sector, but that the broader effects will flow throughout the market.

According to an early January report from Cluttons, there had been an improvement in sales and prices in some categories, continued oversupply in the commercial segment and slow demand for high-end residential properties — especially those in integrated tourism complexes — indicate that the market could remain weak for some time yet. "Cluttons does not feel that the bottom of the market has been reached, and foresees a continued softening of secondary market values over 1Q 2011," the report said.

The price of commercial property was likely to easy with an estimated 500,000 sq metres of new office space set to come onto the market by the end of 2013, while rents are likely to decline. Commercial property owners need to take steps to ensure their existing tenants stay as well as attract new tenants.

"It is vital that landlords adopt a proactive approach, with the emphasis being on achieving and maintaining good occupancy rates rather than concentrating on high headline rental values," the report noted.

The oversupply of commercial properties will likely be a medium-term problem, with the heightened economic activity expected over the next few years — a result of the government's development package — helping to reduce the existing supply of business space and boost rent returns.

The report stated that it is also possible that the state's investment programme could push up real estate prices in the coming years. "The scale of the projected increase in construction activity may put pressure on materials supplies, potentially driving up building costs as a result. This inflation could, in turn, then be passed on to new property buyers," it said.

Nevertheless, the real estate sector is likely to maintain its steady recovery over the next few years and more Omanis will be in a position to buy a home of their own, boasting demand and achieving the government's objective of boosting private equity in the economy. Oman's gross domestic product (GDP) is forecast to increase by about 6% per annum over the term of the latest five-year plan and thousand of new jobs set to be created as the result of the government initiative.