DOHA: The fall in land prices in Qatar since May this year is expected to slow down the rate of increase in rents, a QNB Group analysis has said.
According to the QNB Group, the fundamental driver of real estate prices is the cost of land. If land prices rise, the price of villas, apartments and other property is also likely to go up.
The QNB Group, while analysing the Real Estate Price Index of the Qatar Central Bank (QCB), said that the rise in the land prices up to May 2013 was mainly due to the acquisition of land for major projects that are being implemented in Qatar, particularly land for the Doha metro, large shopping malls and mixed-use real estate development, like Msheireb and Lusail. Since these projects have reached the construction phase, much of the land is already secured. This could lead to an easing of real estate prices.
The Group has analysed data on land transactions in Qatar, based on weekly statistics published by the Ministry of Justice, which indicates that the cost of land has fallen in the last five months — from May to September.
This is likely to ease upward pressures on rents, enhancing the competitiveness of the Qatari economy and relieving concerns that the real estate sector is again experiencing an asset-price bubble like the one in 2007-08.
According to the Real Estate Price Index of the QCB, real estate prices spiked in 2008, before taking a beating in 2009 from the ripples of the global financial crisis. After the crisis, real estate prices picked up steadily, rising 109pc from July 2009 to May 2013.
However, from May to September this year, the index showed a drop in prices of 6.2pc. Accordingly, QNB Group expects rents to increase at a slower
rate.
Rents are also a key component of domestic inflation, accounting for 32.2pc of the consumer price index (CPI) basket.
Most of the remaining CPI components are determined by international prices. Rents in Qatar fell consistently from the beginning of 2009 until the second half of 2012, but since then they have risen.
The Peninsula
