Key trends: Rebounding expat numbers, Omanis joining private sector buoy rental residential market, says report
MUSCAT, OCT 16
Oman’s real estate sector, among the bigger casualties of the coronavirus pandemic, is rebounding close to pre-pandemic levels fueled by, among other factors, the return of expatriates, as well as growing numbers of Omanis joining the private sector.
According to the Central Bank of Oman (CBO), the expatriate population, a key driver of rental residential property demand, declined 15 per cent during the first year of the pandemic, thereby impacting the rental market adversely. The commercial real estate segment also suffered due to subdued demand for office and retail space.
Consequently, property prices declined around 12 per cent in 2020, while the residential real estate index slumped to its lowest level since 2016, the apex bank noted in its newly published Financial Stability Report 2022.
“Structural changes that were accelerated during the pandemic, like more use of video conferencing instead of business travel, increasing trend of online shopping, work-from-home arrangements, and renewed concerns about the environment if persisted, may influence demand and weigh on some segments of commercial real estate. Nevertheless, most workplaces in Oman have moved back to complete face-to-face mode,” the report said.
“Therefore, post-pandemic, with the resumption of commercial activities, and an increase in demand for housing as more Omanis are joining the workforce and the expatriate population almost reached the pre-pandemic levels, the property market appears to be stabilised,” it further stated.
The performance of the real estate market has a bearing on the well-being of Oman’s banking sector, says the Central Bank. With direct and indirect exposure to the real estate sector accounting for over a third of the banking sector’s lending portfolio, the financial industry is particularly concerned about property market vulnerabilities. Within the real estate segment, residential mortgages made up around 17.5 per cent of lending in 2021.
However, tightening monetary policy stemming from the US Federal Reserve’s recent decision to raise key interest rates could have a dampening impact on the “boom” in property prices witnessed over the last two years, the CBO report has cautioned.
It added nevertheless: “Considering these dynamics of the real estate market, while the higher borrowing cost and declining prices elsewhere may soften the appreciation of the property values, we do not foresee any large correction in property prices.”
