Properties go a-begging as households tighten belts
THE pandemic has resulted in permanent lifestyle changes with many households in Bahrain moving to smaller units, it has emerged.
Faced with salary deduction or job loss coupled with high utility costs, families have tightened their budgets this year resulting in a knock-on effect on the property market.
This was revealed in the latest Bahrain property report by global real estate firm, Savills, providing an overview of the impact of the pandemic on the office and residential rental markets.
It highlights how Covid-19 has ‘severely disrupted’ the economic landscape in Bahrain.
“Residential rental rates will continue to decline for the remainder of this year across apartment and villa projects with the high-end segment facing the most pressure,” said Savills Bahrain professional services head associate director Hashim Kadhem.
Subdued
“This is mainly due to more households constricting their budget on the back of subdued economic outlook in addition to uncertainty surrounding employment in the private sector and salary reductions.”
He added that with many people working from home, it may lead to a rise in tenants looking for extra space for home offices and an increased focus on communal areas.
The report documents a high volume of freehold apartments that has entered the market over the past three years with a further 7,500 units expected in the next five years – “worsening the supply/demand imbalance”.
The report also highlighted that residential locations such as Saar, Janabiya and Hamala, which are preferred by employees working in the Eastern Province of Saudi Arabia, may be negatively impacted.
“The temporary closure of the King Fahad Causeway (since March) has left many based in Saudi Arabia for the period of the lockdown and not being able to access their residential unit for a few months.
“This could have a more permanent impact on the market dynamics both from an employer and employee perspective with a requirement to be located in the Eastern Province, causing a further supply and demand imbalance in the western areas of Bahrain.”
The report cites the example of new units in Janabiya available from BD250 per month inclusive of utility bills and rents in Harbour Heights for a new two-bedroom unit starting from BD500 per month all inclusive.
“During Q3 2019, apartments experienced an average year-on-year (YoY) rental price decline of 6.1 per cent against villas which recorded a decline of 4.3pc,” said the report.
“The low end of the market fared worse with year-on-year declines of 10pc and 9pc for apartment and villa segment, respectively.”
The high-end of the market experienced the lowest movement YoY with decreases of 2.6pc and 5.3pc for villa and apartment projects, respectively.
On the office sector outlook, the report said working from home has challenged the traditional office working formula.
“Low-end offices have struggled to compete the most with a 10.1pc rental price decline YoY in the third quarter of the year,” stated Savills Research Middle East associate director Swapnil Pillai.
“It must be noted that the lower end of the market has witnessed rental rates similar to those offered in the industrial market which highlights the stress level the market is facing.
“Low-end offices recorded a marginal increase of 0.1pc whereas the mid-end segment recorded a price decline of 4.3pc for the same period.”
Furthermore, the analysis said a series of steps taken by Bahrain so far this year to offset the Covid-19 impact includes salary assistance for Bahrainis in the private sector, covering utility bills for all subscribers, deferment of loans, waiving government fees and other support funds.
“The support provided by the government throughout this period has reinforced that Bahrain is business-friendly and a great start-up location for international players planning to enter the GCC market.”
The report concludes with a series of outlooks such as developers and landlords offering further incentives to attract buyers and tenants, decrease in demand for sprawling office suburbs and work-from-home resulting in collective family living.
An average of 6,000 foreign workers lost their jobs in March and April due to the Covid-19 impact on businesses, and that number is believed to have increased since then.
More than 4,000 applicants, including Bahrainis, impacted by the global health crisis have so far registered on talentportal.bh which aims to connect employers in the private sector with people seeking employment.
In addition, figures released for the second quarter of the year showed a 4pc drop – more than 20,000 in 12 months – in the number of non-Bahraini Social Insurance Organisation contributors, from 456,840 to 477,741 workers last year.
