Rents have dropped significantly and landlords are flexible with the terms and conditions. Now’s your time to pick places of your choice at bargain prices, report Alvin Thomas and Hasan al Lawati
A myriad of newspaper headlines read that rents across properties in the Sultanate have dropped considerably. It’s a notion – that turned into reality – following the 2015 oil crisis that hit countries across the world. Countries that include the Sultanate of Oman.
While the oil prices may be recovering and the subsequent market now picking up its share of the spoils and rebuilding itself, the property industry – courtesy numerous other factors – continues to fight for retaining its value and, as we see now, keep sales and rental prices up to its full potential.
The case of Sandeep Mehta, a tenant staying with his family in the Azaiba area in Muscat, proves the point that the tenant is king now. The marketing agent recently moved into his new house with a one-year contract that required him to pay RO375 a month for a two-bedroom flat.
The new building – which is registered to a reputed builder – seemed like a bargain. But he soon learnt that his neighbours were paying only RO320 a month for similarly sized flats.
“The neighbours in our flat pointed out that the price of their flats were considerably cheaper during one of our routine chats. That made me furious,” says Sandeep.
He headed to the holding company’s office demanding a drop in the rent. And they readily obliged!
“I was surprised to see that it didn’t take much haggling to get the price low. I was all fired up to make my point. But the lady who was dealing with us pointed out that she would get the rent dropped. And to my surprise, I got the same flat for RO315 per month (along with utility bills), which is even lower than what my neighbours are paying.
“The drop was RO60 plus the RO12 we were paying as utilities every month. This is a great time to rent a house. Plus, our building provides facilities such as a working gym, swimming pool, covered parking, play area, supermarket and much more.”
This is the general consensus around the capital as more landlords are providing tenants with flexible rates. To be specific, as per the Winter 2017/18 Property Market Outlook by real estate agency Cluttons, there has been a 25 per cent drop in rental rates over the last three years in Oman.
But, what are the reasons for this decline? And how will this downtrend affect the industry in the coming years? To answer these questions, which dubious landlords are now asking, we speak to the experts and top-rated builders in the region.
Nouf al Ajmi, the marketing specialist of Tibiaan Properties – one of the leading property companies in the country – accepts that there is a “slight” drop in the rents across the country. She elucidates: “We see that there are several factors involved in this shift. The recent expat visa ban is one of the reasons, and that has led to an oversupply of apartments. Although, oversupply was always a concern before as well.”
She’s right. The recently published Oman Property Market Review by real estate surveyors Cavendish Maxwell reads that rents are expected to fall further due to the government’s move for Omanisation through the “imposition of a new expatriate law causing a six-month ban on expat visa issuance in 87 occupations, as well as residential project oversupply from previous years”.
The report adds: “Continuous decline in rents have put tenants in a stronger position to negotiate terms with owners who in turn are offering better rents and flexible lease terms.”
“Landlords have also been offering three and six-month advance payments, as opposed to annual payments, to reduce vacancy risk on the properties. Furthermore, housing demand is shifting towards more affordable housing causing a stronger rental decline in the premium locations.
“Tenants are migrating and showing a preference towards larger communities with a broader array of existing infrastructure and amenities being offered at affordable values.”
All of this spells well for tenants. Anyone interested in renting a 1BHK (bedroom, hall, kitchen) flat in Al Mouj will now only have to shell out RO640 as per the earlier report. However, an investigation into the local market reveals that you can rent a 1BHK flat for as low as RO450
We also learn that you can rent 2BHK flats in Al Khoud for a meagre RO310 per month, while similar flats in Azaiba or Baushar will set you back only RO440 and RO400 per month, respectively. This is, on average, a drop of RO20 to RO50 from the rents in 2015.
Meanwhile, villas and townhouses in Al Mouj and Muscat Hills now will set you back somewhere between RO1,430 and RO2,230, and 1,520, respectively. Several residents say that there is, on average, a 15 per cent drop in rents across flats, villas and townhouses across the capital.
In the beginning of 2017, the average residential rents receded by about 0.8 per cent, and by 0.2 per cent by the third quarter. The change left average rents at about RO690 per month, which was down by RO5 per month when compared with the third quarter of 2016.
Average rents in Muscat in 2017 also stood at 20 to 25 per cent lower than they were during the third quarter of 2014, according to a statement released by leading international real estate consultancy Cluttons.
Tenants make the most
Albeit, this is now causing a flux of tenants upgrading from smaller flats to bigger, better-equipped flats.
“Let me share an insight with you,” says Nauf from Tibiaan Properties. “Let’s say that you have a middle-quality 2BHK for RO400 a year ago. But due to the slight decrease in rents, landlords are ready to reduce RO20, RO30 or even RO50 from the rents – that is a huge saving for the tenant.
“What I see, though, is that people now want to upgrade. The prices of high-quality flats are coming down – and people want to upgrade from middle-quality to high-quality at the same price or a slight difference.
“Now, people can get better quality living for a cheaper price; complete with security, swimming pools, gyms and more for free.”
While all of this creates a positive impact on tenants, Emad Pattni, the chief operating officer of Union Property Development – a company dealing with ITC projects freehold and properties – goes on to say that we’re now in a “tenants’ market”.
“There have been a lot of people asking about the expat visas and so on. But that is only affecting the lower income group and not the white-collar workers.”
Emad then touches upon the topic of oversupply: “The issue is that there has to be an analysis before a landlord or property owner builds a property. Normally, what happens is that they just build and expect things to happen.
“If you don’t do your homework properly and jump into something, what’s going to happen is that you’re going to be taking a risk. And most of these landlords take finance from banks, so they must pay the amount back,” he adds.
While the statistics of vacant properties are vague, it is known that the average number of villas built in Muscat between 2003 and 2010 was around 3,000. This inevitably rose to around 9,000 villa permits being issued in 2016.
“What happens then is that they are forced to drop rents to get them occupied to pay the bank. We feel that this isn’t particularly affecting big players in the market,” he exclaims.
But according to him, a shift in the trend in the first quarter of this year is the response to the buyers’ market (those buying properties in Oman).
“Regions outside Oman have reached a certain peak level. Oman never really opened up to investments from outside before. But now, there is a lot of movement happening within the economy. And more doors are opening,” an enthusiastic Emad tells Y.
“The higher you jump, the harder you fall. Our neighbouring countries have witnessed that and Oman has not had any history of a really bad economy or political instabilities. These are huge bonuses to the country.
“In terms of the future, there is a lot of land available for development; from small to large scale. But even then, when you look at the pace, we’re moving steadily – and that’s why I see the Omani market is slowly going from strength to strength.”
Drop in property trade
While the COO’s optimistic statements may be welcomed by property builders across the Sultanate, it clashes with the ‘Oman Property Market Review’ report, which – in accordance to a report released by the Ministry of Housing – states that the total value of property traded (rentals and buying) in 2017 dropped to RO2.6 billion, which is a staggering 61 per cent drop from its values in 2016.
The demand, according to the ministry, is low due to the pressure on housing budgets resulting from taxation.
“When you have a problem, you have to admit it first. And finally, it has been admitted. So, now we will have come up with solutions to tackle the issues,” says Nauf.
“As an Omani, I see my country as a land of opportunities. I see what is happening now – the situation is hard and we are in the middle of a crisis – however, the opportunities in Oman are amazing and are ever-increasing. Now people are more aware and knowledgeable.
“Tibiaan Properties is doing rather well in terms of sale, returns, investment and revenue. We have managed to have a growth during this period (2017 and first quarter of 2018).
“To be honest, yes, 2017 was a tough year. We have seen some indicators for a good growth, even though it is a slight increase.
“The scene is like this: People do have money; maybe it’s not in a surplus, but there is still a substantial amount being put into properties. I’m not saying all of them have, but the one per cent of the community that have the money want to invest it,” she explains, before telling us that there has been a strong increase in the number of foreign investors looking to invest in the Sultanate.
“A lot of people are also coming from outside. For instance, we have Qataris and Kuwaitis coming in to invest here. And it’s not just in Tibiaan but in many other industries too.
“The economy in Qatar, for instance, is really great and they’re trying to expand to other markets. They like the country and the people, and they trust us.”
In 2017, more than 33,000 GCC citizens owned lands in the Sultanate for various purposes.
Oman’s geographical location – which puts it bang in the middle of the trade hub that connects the GCC to the Eastern hemisphere – also adds to the allure of the country.
“Logistics and tourism are the two strong pillars that were in focus in the Tanfeedh, and is what sets Oman apart from a lot of other countries in the region,” she adds.
And as Oman’s GDP growth is set to rise to 5.2 per cent next year, aided by the introduction of natural gas production at the Khazzan gas field and the opening of the new airport in Muscat, we can only expect the real estate market to stabilise over the forthcoming months.
But for those who are looking to rent out flats, there’s no better time to do so than now.