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Friday, March 5, 2021

Real estate firm: Housing becoming unaffordable for many in Doha

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Empty wallet
Photo for illustrative purposes only.

The average expat household in Qatar is spending more than a third of its annual income on rent, suggesting that the city’s housing market is becoming unaffordable for many residents, according to a new study.

“Affordability” is a relative concept. However, benchmarks set by housing authorities in the US, UK and Australia generally suggest that households spending more than 25 to 30 percent of their annual income on accommodation may have difficulty affording other necessities such as food, clothing and transportation.

By those guidelines, many tenants in Qatar are being financially squeezed.

According to international real estate services firm Colliers International, the average expat household in Qatar spends 34 percent of its income on housing.

The study on the country’s residential market is based on figures collected by the Qatar government and excluded low-income blue-collar workers, who generally live in company-supplied labor accommodations.

The gap between supply and demand for homes in Doha has widened in recent years.
The gap between supply and demand for homes in Doha has widened in recent years.

The primary factor, Colliers said, is that developers are not building enough low and mid-cost housing to keep up with Qatar’s rapidly expanding population.

“There is little or no vacancies in the residential market. Growth in housing stock fails to meet the growing number of households … With the supply shortage increasing annually, the accommodation costs have also been escalating.”

In recent months, the government has taken measures that will further reduce the supply of accommodation options at the lower end of the market by cracking down on illegally partitioned villas.

Hurting economic growth

While the shortage of affordable housing options causes headaches and hardships for individual residents, Colliers argues that it also stunts the broader economy.

With an insufficient housing stock, companies have more difficulty attracting and retaining expat employees and must raise compensation levels, increasing the cost of doing business.

Additionally, spending a high proportion of one’s salary on housing means expats have less disposable income to purchase other goods and services, hurting overall economic growth.

Photo for illustrative purposes only.

Rising rents are the primary driver of Qatar’s rising cost of living. Last month, the consumer price index rose 3 percent, driven by an 8.2 percent year-over-year increase in rents, fuel and energy.

The costs of most other goods and services, however, climbed at a much slower pace of between 0.8 percent and 3.5 percent. Food prices actually fell 0.6 percent year-on-year due to bountiful harvests around the world.

The cost of living – and, more specifically, the ability to house expats – is an important issue for Qatar as continues to recruit foreign workers to prepare the country for the 2022 World Cup.

Adding additional pressure is the competition for skilled workers from Dubai as the city ramps up development efforts for the 2020 World Fair.

Colliers said that the challenge facing Qatar is likely to become more acute in the coming years:

“The increasing rental rates continue to be a concern for many expatriate households in Doha. With Qatar’s population witnessing some of the highest growth rates in the world, the concern for more ‘affordable’ housing solutions, both within the rental and the sales market, are only likely to be exacerbated in the short to medium term.”

Neighborhood comparisons

According to the report, rental rates, measured per square meter, declined between 2008-11 before starting an ascension that continues to accelerate.

Average apartment rental rates in popular Doha areas.
Average apartment rental rates in popular Doha areas.

Colliers said rents increased 10 percent year-over-year in 2013 before climbing a further 14 percent this year to an average of QR799 per square meter, per year. That’s still below 2008 levels, when rents averaged QR875 per square meter.

Based on current market rents and the international benchmarks, Colliers conducted an “affordability analysis” that determined a minimum monthly salary a household should be earning to be able to live in certain areas of Doha:

  • Al Sadd and Old Airport: QR18,000 (one bedroom) – QR28,000 (three-bedroom);
  • West Bay: QR31,000;
  • Pearl-Qatar: QR35,000.

Using this measurement, only about 30 percent of expat households in Qatar can afford to live in these neighborhoods, Colliers says.

Solutions

Some local residents, and at least one member of the Central Municipal Council, have called on the government to reinstate rent controls as way of making housing more affordable in Doha.

While a such a move would provide residents with some short-term relief, economists argue that it can make the problem worse in the long run as government-imposed rent caps and freezes act as a financial disincentive for investors and developers to construct more rental housing.

Photo for illustrative purposes only.
Photo for illustrative purposes only.

In its report, Colliers called for the government to encourage developers to construct more mid-market homes. Specifically, it suggested officials consider offering direct incentives, such as land, favorable financing programs or directly engage in partnerships with the private sector to construct more affordable housing.

The same suggestion was also raised earlier this year at the annual Cityscape Qatar real estate forum.

Ramy Echo, the chief investment officer of Kuwait-based Alargan Investment Co., said at the time that his experience elsewhere in the Gulf suggests that the only way to increase the stock of more modestly priced homes is through public-private partnerships between developers and government.

“We categorize ourselves as a middle-income, affordable developer. It’s worked, only because of government support,” Echo said.

Here’s a copy of Colliers’ full report:

[scribd id=248416170 key=key-Go1VsEblL8gSDfzKiIo2 mode=scroll]

Thoughts?

21 COMMENTS

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Ali El Ali
Ali El Ali
6 years ago

Avg villa inside Doha is at 16000 qr while outside is 13000 qr and still rising. Some are refusing to lease you a villa until certain amount of proposals are offered and finally they pick the most expensive offer. There is no law to protect you. Pearl residents are complaining of rent increase up to 30% every contract renewal. This is only 2014, I wonder what will happen as per above demand and supply on 2018. The problem is salaries are still the same and Qatari themselves are not able to build there own homes due to high cost of construction so they are resolving to rent which reflects to the rate of the salaries provided above. The question is how expatriates will face the rent inflation in the next coming years.

Anonymouse
Anonymouse
6 years ago
Reply to  Ali El Ali

They won’t. They will leave every two years, next bunch of ignorant will come, leave after two, repeat. Already a huge problem in many industries, but is being swept under the rug. Tremendous amounts spent on recruiting etc and all thrown away because staff can’t be kept.

Observant One
Observant One
6 years ago
Reply to  Anonymouse

So true..

sicti
sicti
6 years ago

Greed…

Bornrich
Bornrich
6 years ago
Reply to  sicti

Demand exceeds supply, prices go up. What the report is saying is that the wrong sort of housing is being built. More studio flats, fewer 3 bed apartments and 4-6 bedroom villas.

sicti
sicti
6 years ago
Reply to  Bornrich

Yes, this is market rule but knowing how many buildings and compounds are empty and locked, waiting for higher rents…pure greed.

sicti
sicti
6 years ago

Thank you Sir but we are talking about real life, not movies 🙂

Osama Alassiry AlMaadeed
Reply to  sicti

I preferred to use a pop-culture reference to what an economist like Milton Friedman describes as “greed” as “individuals representing their separate interests”

http://youtu.be/eiyhN2qbSGg
😉

DJ25Q
DJ25Q
6 years ago

The only party that can interfere to resolve this crisis is not willing to….. I don’t see a valid point discussing this or wasting more money on studies as both the causes and the solutions for this problem are well known since early 2000.

Ali
Ali
6 years ago

It’s interesting how people have to make approx. Qrs. 18,000 or 15,000+ to afford to live in a single bedroom apartment. Where as on average most people don’t make more than 8,000 riyals in Doha (Some way less depending on their nationality). I wonder on what basis do they keep increasing the rent? it’s not like people are dying to live in Qatar or the demand is very high.
This is one of the major reasons why this country cannot be sustainable. People expect to make tons of money before coming to Qatar as to everyone outside Qatar this country is a gold mine and people will just throw money at them. But what they don’t expect is how expensive is it in Qatar to live and since they are trapped in the company’s sponsorship they can’t quit their jobs and leave hence they get stuck here till their contract is over and fall into depression. Once the contract is over a new employee takes over and the company has to spend money, time and effort to train the new employee for 6 months and the cycle continues hence no sustainability.

A_qtr
A_qtr
6 years ago
Reply to  Ali

this is the problem with many young omani, bahraini and saudi youth who come to doha for work. though they will be making 2 to 3 times their wages back home, they are shocked when they realize how expansive doha is. aa 2 br flat in doha could cost 8,000+ riyals a month, the same villa in damam would not cost more than 1,200 saudi riyals!

Deepak Babu
Deepak Babu
6 years ago
Reply to  Ali

Aren’t the companies recruiting staff and keeping them in the dark about this also responsible? Maybe the solution for this would be to force all companies to provide accommodation for staff and not just the joke of an allowance that they do currently.

A_qtr
A_qtr
6 years ago

good report… their are several quick fixes to this issue… the problem is the decision makers are some of the biggest landlords in the country… long term value for the state isn’t high on their list, just their short term personal gain

Yacine
Yacine
6 years ago
Reply to  A_qtr

At the same time, it is not fair to force them to decrease their prices as this would send a negative message to future investors. The only solution is that Barwa and Ezdan embark on multiple massive housing development projects that would supply for example 120k new apartments and villas by 2016. These housing units will be provided at reasonable prices (4000 max for 2bdr, 5000 for 3bdr, and so on) and thus landlords will understand that they do not have the control of the market anymore. In addition, the government will also reap some profits from the real estate market, as even with reasonable pricing the state can make decent profits.

MIMH
MIMH
6 years ago

Qatar needs to be a managed economy during this period of rapid growth until it is a more mature economy and you can let market forces dictate. Probably the only person that can enforce this is the Emir as many senior members of the government are also Qatar’s biggest
Landlords so have a conflict of interest. They are making serious money due to the housing situation so why would they want to change it?

Parwaiz Win
Parwaiz Win
6 years ago

I was renting a 2 bedroom on The Pearl for QR 13000 and when 1 year contract ended…I asked the owner for an extension with an exit clause just in case my company decided to relocate me.The owner said ok but wanted a year’s rental in advance with a 10 percent increase. I moved out and took a 4 bedroom 3 story villa behind QNCC Al Gharaffa for QR 10000. I agree there might some shortages in housing for middle and lower income groups since their population increase exponentially compared to upper management expats BUT … the real issue for expats is … WE ARE SPOILT AND ARROGANT IN QATAR !! Most who make QR 25000 to QR 50000 a month here in Qatar earned much less back home and most likely lived in Zone 3 …4 … 5 …and maybe even 6 in London; shared a flat with someone or lived with family…or a 1 bed studio on some road no one knows but here…many have become modern day cheap knock off bourgeois aristocrats !! For many of us The Pearl and West Bay are equivalent to Knightbridge and the additional money has got into our heads and inflated it. If one wants cheaper accommodations… there are plenty … its not the shortage but instead its our own self indulging disillusion belief and amnesia about where we are really from is the root cause. So…if we could just deflate ourselves….come back down to earth … maybe … we too can find affordable housing that don’t bleed us to death..no ?

Saleem
Saleem
6 years ago
Reply to  Parwaiz Win

Good point

A_qtr
A_qtr
6 years ago
Reply to  Parwaiz Win

Mind blown

MarkDoha
MarkDoha
6 years ago

The property market in Qatar isn’t perfect (ie open to the norms of supply and demand), it’s manipulated. I heard recently that there are still only 2,000 to 3,000 people living on The Pearl against a capacity of 25,000. The completed towers on Viva Bahriya have low occupancy. Qanat Quartier is a ghost town. Medina Central is completed, but empty and there are new towers coming online in Porto Arabia. Supply is throttled to create a fake shortfall which keeps rental prices rising, which artificially maintains higher rental yields…which makes investment appealing…which keeps purchase prices high…which keeps the developers in business. The Pearl is a bubble which tenants are paying to keep inflated.

Kazmister
Kazmister
6 years ago

@Parwiz : Not true.
@everyone: A major factor in rent inflation is the increasing overhead imposed by sub-lessors or what is now fashionably called real-estate. Malayalis are now directly/indirectly involved in over 70% of non-commercial real estate. So, out of the 10,000 that you pay towards monthly rent, a crisp 2000-3000 end up in the pockets of real estate lessors/sub-lessors.

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