Bahrain residential deal volumes rise 5.1% as prices stabilise: Knight Frank

The residential sector has witnessed a 5.1% rise in real estate transactions during the first nine months of 2023. Additionally, there has been a marginal increase of 1.9% in the total transaction value, reaching BD 814 million, according to Knight Frank’s latest report “Bahrain Real Estate Market Review – Autumn 2023.”

Faisal Durrani, Partner – Head of Research, MENA, commented: “The higher growth in transaction volumes compared to transaction values suggests a decline in prices. Villa developments have continued to captivate buyers, with average sales prices in the mid-end segments holding steady at BD 625 per square meter. However, the cost of credit has affected premium developments, particularly apartments, which saw a 2% decline to BD 665 per square meter”.

Additionally, expatriates, constituting an estimated 52.6% of the total population by 2022, continue to be a driving force in Bahrain’s rental market. Demand for rental properties remains consistently high, particularly in sought-after expat-friendly locales such as Juffair, Amwaj Islands, and Al Seef.

Office Market

The sustained migration of corporate occupants to high-quality Grade A developments has fuelled a strong demand for office space in upscale buildings over the past year. Despite this trend, rental values have remained stable at BD 58 per square meter in Q3 2023.

Stephen Flanagan Regional Partner and Head of Valuations & Advisory – MENA says: “Bahrain’s GDP growth for 2023 is forecast at 2.7%, surpassing its earlier projection of 2.1%. The IMF’s July 2023 World Economic Outlook underscores rising confidence in economic resilience, even amid elevated interest rates. Furthermore, government policy changes, notably the introduction of the Golden Licence Scheme, which benefits foreign and local businesses, are likely to boost business activity, foster job creation, attract foreign direct investment, and contribute to increased demand and rental rates in the office market.”

Retail and Industrial Market

The retail sector has faced its own set of challenges in the past year. Average lease rates across all retail categories have seen a 5% decline, primarily due to an excess of retail inventory in Bahrain. The pandemic has accelerated the shift to online retailing, prompting the retail industry to evolve rapidly.

Flanagan added: “Consumers now seek shopping destinations that offer experiences, mirroring trends elsewhere in the world. This change in consumer behaviour has sparked a demand for destination retail and mixed-use developments that incorporate the public realm, F&B, and entertainment. Furthermore, there is a genuine risk of oversupply in this segment of the real estate market”.

On the industrial front, the market in Bahrain has witnessed warehouse lease rates grow by 5.3% over the last 12 months due to a demand-supply imbalance. The average lease rate for warehouses now stands at BD 37 per square meter per annum. Government efforts in Bahrain to boost the industrial sector, attract investment and encourage innovation, including the establishment of special economic zones, have motivated businesses to either establish a presence in the Kingdom, or expand operations, according to Knight Frank.

Hospitality Sector

In the hospitality sector, Bahrain has embarked on an ambitious tourism strategy with the goal of welcoming 14.1 million visitors annually by 2026, aiming to elevate the tourism sector’s contribution to the country’s GDP to 11.4 percent by the same year. In 2022, Bahrain attracted 9.9 million visitors, according to Bahrain’s National Portal.

Durrani concluded: “The recent initiative between Saudi Arabia and Bahrain to promote the two countries as one regional and global tourist destination has established a framework to collaborate to market tourism programs and activities in both countries. Furthermore, the recently announced GCC-wide tourist visa, similar to the EU’s Schengen scheme, is expected to be a game changer for tourism in the region, once the new system is activated.”

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