The amazing Qatari boom - housing prices continue to surge
Last Updated: October 17, 2015
The value of real estate transactions rose by 18% y-o-y to QAR36 billion (US$9.8 billion) in the first half of 2015, and has almost tripled over the last five years.
At the Porto-Arabia Pearl, the first phase of The Pearl-Qatar, which has a total of 31 towers:
- In the primary market, the average apartment sales price rose by 7% to QAR17,000 (US$4,669) per sq. m. in Q3 2015 from the same period two years ago, according to real estate firm DTZ Qatar.
- In the secondary market, apartments were sold for up to QAR15,000 (US$4,120) in Q3 2015, up by about 15% from two years ago.
“Prices have continued to rise in The Pearl-Qatar, especially for most studio, one and two-bedroom units,” says Dan Strutt of real estate agency LS. “It is a city in itself and being a freehold zone, it is a lifestyle location,” added Strutt. Residential properties in The Pearl-Qatar now sell for more than QAR10,000 (US$2,747) per sq. m.
Even prices of affordable housing are rising rapidly. In Barwa City, house prices rose by 46% y-o-y during the first half of 2015, according to local daily The Peninsula.
There has also been a significant rise in mortgage valuation applications, fuelled by expatriate homebuyers in freehold areas. Real estate loans rose by 10.8% y-o-y to March 2015 to QAR94.32 billion (US$25.91 billion), according to the QCB.
In 2009 housing prices in Qatar fell by as much as 40%, while residential rents dropped about 25%, due to the global financial meltdown. according to Century 21 Qatar. Then in 2010, housing prices fell again by about 4%, according to Saudi-based banking firm, Samba Financial Group.
Prices started to stabilize in 2011, thanks to spectacular economic growth. From 2012 to 2014, the property market expanded strongly, mainly due to rapid population growth caused by the steady job growth in non-hydrocarbon sectors such as finance, hotels, restaurants, and trade and transport. The country’s population reached 2.37 million in May 2015, up by 9.2% from the same period last year, reflecting the large influx of expatriates.
Qatar issues permanent residence visas to foreigners buying freehold properties, under Law No. 17 of 2004, which permitted foreign freehold property ownership for the first time. A property boom followed from mid-2000s to early-2008. Three areas have been set aside for the visas-for-sale scheme: the Pearl-Qatar, West Bay Lagoon and Al Khor Resort.
The visa remains valid as long as the foreigner keeps the property in his name. Foreigners and expatriate residents account for about three-fourths of the population, according to the Qatar Statistics Authority (QSA). About 82% of the population lives in Doha and Al Rayyan.
“With Qatar’s population growth set to increase by over 7 percent per annum in the coming years, the real estate market will need to expand more quickly to keep pace and avoid overheating the market,” said Johnny Archer of DTZ Qatar. GDP growth is expected to rise at 6.5% per year for the next two years, with a continuous influx of expatriate workers.
Yields in Qatar are excellent at around 12%
Qatar rentals have tripled in the past six years. Yields are now excellent. “A landlord who has just bought a new five bedroom house for QAR1.8 million (US$494,105), a good quality house, is renting it out at QAR18,000 (US$4,941) per month,” says Parry. This rental translates into a annual gross yield of 12%.
Rentals of QAR25,000 – QAR40,000 (US$6,863- US$10,980) are more usual houses in West Bay, an upscale residential district. Then there is West Bay Lagoon, which is even more expensive.
“There is a very limited supply of condominiums at the moment, only 2-3 buildings,” says Parry. “All that will change when the Peal of the Gulf comes on stream in the Q1 of 2008.”
Income tax ranges from moderate to high in Qatar
Rental Income: Rental income is considered a business income and taxed at a flat rate of 10%.
Capital Gains: Capital gains derived from business activities are taxed at a flat rate of 10%. Otherwise, capital gains are not taxable.
Inheritance: There is no inheritance tax in Qatar.
Residents: Resident individuals are not subject to tax on their income and capital gains, provided that these are not derived from business activities. Business income and capital gains are taxed at a flat rate of 10%.
Transaction costs are very low in Qatar
Transfer fee is levied at 0.25% of the property value. Other costs when buying property are very minimal, such as authentication fees of documents.
The laws are mildly pro-tenant
b>Rent: Under Law No. 4 of 2006 in effect from February 2006 to February 2008, annual rent increase is limited to 10%. The implementation of the rent cap is widely expected to be extended.
Tenant Security: There are in theory only three reasons the landlord can give to force his tenant to leave: non-payment of rent, moving in of close family, and to demolish the property. However, there are reports that this law is often not observed, and that landlords are using fictitious demolition plans to squeeze their tenants out.
Economic growth was slowed enormously, but is still very strongQatar is one of the fastest growing economies in the world. The country is the world's biggest exporter of liquefied natural gas (LNG). It has also more than 15% of the world's proven gas reserves. Qatar has one of the highest GDP per capita in the world in 2014, at US$93,990. Its wealth has grown at breakneck speed during the past 15 years, particularly since the Iraq War.
In the early 1990s, the country launched LNG projects to tap the massive gas deposits at the 6,000 sq. km offshore North Field. The gas wealth was estimated at around 25 trillion cubic metres, 15% of the world’s total gas deposits.
The country’s economy grew by an average of 21% from 2006 to 2008. And despite the global crisis, there were further spectacular growth rates of 12% in 2009, 19.6% in 2010, and 13.4% in 2011.
Economic growth since slowed sharply - to 4.9% in 2012, mainly due to a self-imposed moratorium on new hydrocarbon projects, to conserve resources. After expanding by 4.6% in 2013, Qatar’s economy grew by just 4% in 2014, mainly due to a decline in oil prices.
The economy is projected to grow by 6.5% per year for the next two years.
"Real economic growth, despite lower oil prices, is expected to remain strong in 2015 on the back of vigor in the non-hydrocarbon economy that is set to carry through to 2016 and 2017, before it moderates," said the Ministry of Development Planning and Statistics.
The budget deficit surged to 10.1% of GDP in Q1 2015, in sharp contrast with the surplus of 21.2% of GDP in Q4 2014, according to the QCB.
Inflation slowed to 1% in Q2 2015, according to the QCB. After annual inflation of 13.5% from 2006 to 2008, consumer prices fell by an average of 3.6% per year from 2009 to 2010.
Unemployment dropped to 0.2% in 2014, from 0.3% in 2013, 0.5% in 2012, and 0.6% 2011, the lowest in the Middle East, according to Qatar Statistics Authority (QSA). Qatar’s highest-ever unemployment rate was 3.9%, seen in December 2011.
The country’s population reached 2.37 million in May 2015, up by 9.2% from the same period last year, reflecting the large influx of expatriates. Foreigners and expatriate residents account for about three-fourths of the population. 82% of the population lives in Doha and Al Rayyan, according to the QSA.
Qatar will host the 2022 FIFA World Cup. In preparation for this, the country has been locked in a massive infrastructure development which involves spending of more than QAR264 billion (US$100 billion).