Some 10 to 12 years ago, one could buy at least 500 square metres of land on the outskirts of Doha for up to QR 200,000 (USD 55,000). Land was cheap then and construction costs were affordable for people to make houses for actual use as well as for rental income.
But last year, in 2014, all hell broke loose, when a property in the Old Ghanem neighbourhood of Doha was sold for a record-breaking rate of QR 207,000 per square metre. In July 2014, a 1.65 sq. m plot of land in Al Mirqab area was sold for QR 250m, the rate per square metre being equally high at QR 151,000 (USD 41,000). These were not scattered instances of, or one-off, premium property deals concluded in Doha in 2014.
Property prices have been hovering at high levels in the capital city particularly as its topography is in for a massive change due mainly to the Greater Doha Metro system being built. Land is scarce in the city so, naturally, properties near where there would soon be metro stations carry a premium.
Old Ghanem, according to real estate evaluator and expert Khalifa Al Muslemani, is different since it overlooks the picturesque Corniche, where the Museum of Islamic Art is located, and where there is a concentration of affordable medium and lower-end hotels.
After the Asian Games in 2006, land and rent prices stablized in Qatar but once the country won the coveted bid to host the FIFA World Cup in 2022 in December 2010, things changed again and considering that there would be pressure of increasing population on land, property rates began looking up once again – this time feverishly.
“These are the highest land prices we are presently seeing,” another real estate expert, Mansoor Al Mansoor said. He said in remarks to a local newspaper last October that due to rising land prices, the cost of construction had increased almost 30 percent, negatively impacting the rental market. Al Mansoor said that demand for more housing due to increasing population fuelled by mega development projects for the 2022 FIFA event, had been putting pressure on land. And since developed land is scarce, it is natural for their prices to soar.
Yet another property market expert and veteran real estate management professional, Ahmed Al Oruqui, said that there was a lot of speculative activity in the real estate market and that was seeing prices soar. He said developed land (land with basic infrastructure like sewage, roads, and water and power connections) was in short supply.
So due to the squeeze on supplies, the same properties, more or less, were being bought and sold in repetitive cycles. Al Oruqui said in comments published by a local daily in April that speculators were mostly Qatari and were essentially investors who were staking huge sums for rental income. In other words, investors are buying land to build housing stock which would guarantee them stable rental income in the medium to long-term.
In fact, in the last 10 years as the Qatari economy has expanded vastly thanks to financial windfall from rising LNG exports, people here have become immensely wealthy. As an example, the per capita income of the country has multiplied considerably in recent years. The per capita GDP, or income, was USD 58,000 in 2008, and it breached the USD 100,000 barrier in a matter of five years, by 2013. “People have money and they want to park it in real estate which is a safe investment and also guarantees regular rental income,” said an investment banker.
Speculative activities galore
That explains why there is so much of speculative activity of late in the thriving real estate sector, say officials of some real estate agencies that are keenly watching as a new law is being implemented so illegal middlemen operating in the market are elbowed out.
These middlemen don’t have anything at stake. They just carry briefcases in their cars and make millions brokering deals. “They don’t have an office so they don’t have to pay rent or employ staff as we do. They don’t have an address.
Their office is their car and yet they make millions which we don’t,” a real estate agency owner was quoted by a local daily as saying about illegal middlemen last year.
The other kind of speculative activity in the real estate market, according to Al Oruqui, goes on in places like The Pearl-Qatar and Lusail City. While the Pearl-Qatar may have reached saturation with speculative activity coming to a standstill as prices remain high, in Lusail, according to Al Oruqui, as land is still available speculative activity is still going on.
The Pearl-Qatar is a freehold zone where foreigners are allowed to buy property on ownership basis while in Lusail properties can be bought by foreigners only on long lease. Technically though, it is as good as owning a property here for stay or rental income.
A look at weekly property transaction figures released by the Real Estate Registry office of the Ministry of Justice shows that prices are not going up in Doha alone, they are rather showing an upward trend almost everywhere in the country basically due to development work going on all over.
Late last year, land prices peaked at record highs in places like Abu Zuloof in the north of the country, an area few people were familiar with. Here, the rate went up to QR 1,840 per square metre in September 2014. And the fact that prices were also quoted by the Ministry of Justice in square foot (QR 171 per sq ft) showed that there was demand for smaller plots of land as well for housing.
In the Old Airport neighbourhood of Doha, for instance, the rates soared up to QR 12,000 to QR 13,000 per sq. m, or QR 1,115 per sq ft. In Al Khor, the rate averaged at QR 3,000 per sq. m and any property near the Corniche in this town carries a punishing premium. Property transaction figures issued by the Ministry of Justice for the week from 31 August to 4 September, 2014 show that in far-off places like Al Khartiyat, prices remained high at QR 4,000 per sq. m, or QR 371.6 per sq ft.
Market watchers say they expect property transaction value in the country to jump by more than 20 percent in the excited run up to the FIFA 2022 World Cup. “However, there is a caution here,” said a property market operator. “The prices can’t go up like how they have been at a maddening pace. They would eventually weigh on the real estate sector.” True. The growth in property transactions was more than 30 percent in 2014, with the aggregate value crossing the QR 50 billion-mark.
Meanwhile, the steep rise in property prices in the country in witness in recent times has caught the attention of the International Monetary Fund (IMF). In a report issued last April, the IMF termed the price rise in Qatar’s property market as dramatic. The report expressed some concern over the rising rates noting that while the number of real estate deals had gone down in 2014 as compared to 2013 (which saw a peak), their value was up.
This showed prices were going up. The report said outer areas were in the limelight in terms of growth and they included places like Al Wakrah and Al Daayen. Development projects in these areas are fuelling demand and the consequent price rise. Prices were rising in Al Wakrah due to its proximity to Hamad International Airport (HIA) and the proposed Doha Expressway that would be passing through the satellite township. As for Al Daayen, its closeness to Lusail was pushing property rates up here, the IMF report noted.
Rising land prices remain a cause of worry, say analysts, as house rents might not stabilise over the medium to long-term since land is a major component of a real estate development project.