Abstract
In our last report on Bahrain real estate markets we identified the following
key issues:
- The general downtrend of property markets in Gulf
Cooperation Council states;
- The absolute level of bank lending in
Bahrain;
- The continued strong commitment to infrastructure spending;
- A reduction in the clear over-supply of commercial office accommodation;
- Regulatory and legal reforms
- Potential for a return to growth in
residential property prices.
Most of these issues remain relevant.
Bahrain, in common with the rest of the GCC countries (with the
possible
exception of Saudi Arabia), has been affected by the global credit crunch and
associated
economic downturn. There are nascent signs of improvement in
economic conditions in the GCC,
although how strong and sustainable these
will prove to be is debatable.
Certainly Bahrain’s economy has shown
signs of life. Bahrain' s central bank has raised the value of its
latest
Islamic bond issue by half to US$750mn because of strong demand. The island
nation' s central
bank had initially offered US$500mn in sukuks, or bonds
that comply with Islamic law, but said the
issuance was almost eight-times
oversubscribed.
In May 2009, the international rating agency, Fitch,
reaffirmed Bahrain' s long-term foreign currency
Issuer Default Rating
(IDR) at "A" and long-term local currency IDR at "A+", both with stable
outlooks.
Continuous growth in Bahrain' s non-oil sector, as well as
enhanced political and economic reforms, were
taken into account by Fitch
for the rating reaffirmation.
The immediate impact of the global economic
crisis on Bahrain' s construction and real estate sectors in
any case has
been less severe than elsewhere in the Gulf region. Nevertheless, real estate
firms report that
consumer demand in the property market has diminished
since January.
Nasser al Ahli, head of the Bahrain Real Estate
Association, was quoted by local media as saying
property prices overall
had fallen by 10% to 15% since the economic crisis began with residential
prices
down some 20%.
Two casualties in Bahrain have been the US$1bn
(BHD377mn) Salam Beach Resort and the US$300mn
Bahrain Business Park,
which have been put on hold.
First Bahrain, a leading property firm, has
also cancelled a US$450mn mixed-use project, which was
planned for
construction in Seef district of Bahrain, because of the economic
downturn.
A major trend throughout all our real estate reports is that,
mainly as a consequence of the global financial
crisis, access to funding
will be more important than usual. Accordingly, we have incorporated
overviews
of conditions in the commercial banking sector – both
globally and in the region of each country. We
have also looked at the
issues that will drive the fortunes of Real Estate Investment Trusts (REITs)
over
the coming months.
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