Tourism will drive growth in Omans real estate market heading into 2017 as the residential and office markets continue to stagnate, according to new research.
A buoyant tourism sector is feeding a period of exponential development in the four and five-star hotel market, says international real estate consultancy, Cluttons.
Over the next two years, hotels currently under construction will deliver a 50% increase in room supply to the premium segment of the market, according to The Cluttons Winter 2016/17 Property Market Outlook report for Muscat.
Philip Paul, Head of Cluttons, Oman said: While the local residential and office markets are feeling the burden of economic challenges, Muscat remains a highly attractive tourist destination within the Gulf and investors have taken note.
The significant increase in supply we’re anticipating will result in a more competitive market from an operator perspective but will also provide an increase in choice for customers. We expect this will help to drive the continued growth in the tourism and hospitality sector, with other operators drawn in by the allure of a rapidly emerging market.
Paul said the outlook is less positive for the residential and office markets with a number of factors impacting performance.
The volatility caused by low oil prices has had a knock on effect on the number of professionals working in the Sultanate, but redundancies have now spread well beyond the oil sector. This in turn has heavily impacted the demand for real estate, he said.
In the residential market, average rental rates fell by a further 2.3 percent during Q3, bringing the total decline for 2016 to 8.1 percent.
Faisal Durrani, Head of Research at Cluttons, said: The prospects for an immediate turn around in the residential market remain unlikely and, given the countrys heavy reliance on the oil and gas sector, outlook for the residential market remains weak. During spring we forecast residential rents to end the year 10% to 15% down overall and it appears we are on track to achieve that, reflecting the average decline in tenants budgets of 10% to 20% that we have recorded this year.
“More positively, the government is clearly working hard behind the scenes to drive more efficient spending, while at the same time undertaking sentiment boosting mega projects such as the recent tendering for the first phase of Oman Rail and the progression of works related to the USD 1.3 billion redevelopment of Mina Sultan Qaboos. Projects such as these bode well for future demand for residential property, but for now, the outlook remains subdued.”
Cluttons reports no quarterly change in office rents across the six submarkets monitored during Q3.