(MENAFN- The Peninsula) After heating up to its best pace over the past several months, Qatar's real estate sector is headed for a soft landing. Recent analysis based on market research and official data suggest the market is likely to experience a slowdown after a robust growth.
According to the Qatar Central Bank (QCB) real estate price index, transaction prices at end-2014 were 34.7 percent higher than a year earlier. With land and villa prices continuing to appreciate year on year, the average index level for 2014 (229.8) is 19.6 percent higher than the index peak of August 2008 (192.2).
But the residential prices, though the only subcomponent to register a decline in prices over 2014, fell 20 percent year-on-year.
The country's latest economic outlook forecast the annual inflation, as measured by the change in the consumer price index (CPI), to average two percent in 2015, down from 3.3 percent in 2014.
In part, the subdued inflation outlook is explained by a lower weight of the housing and utilities component of the index, which has been the principal driver of consumer price inflation in the past two years.
This growth component is expected to moderate over 2015 and this will bring down headline inflation. A weakening in rental inflation and in overall pressures on prices is seen in the inflation data over the first four months of 2015, the document released by the ministry noted.
Qatar's construction sector, projected to expand by 13.6 percent in 2015, will continue to expand through 2016 and 2017. But its pace of growth will slow, with the emphasis moving to completing existing investments rather than starting to build new assets, the Ministry of Development Planning and Statistics (MDPS) noted last week.
In fact, it is a double whammy for the real estate sector. While, the market is headed to a slowdown, the real estate stocks are taking a hit at Qatari bourse. FIFA Chief Sepp Blatter's surprise decision to quit his post wiped off about QR16.4bn off the Qatar stock index, amounting to three percent of its total value. The real estate stocks were battered by 7.11 percent.
Ezdan was the worst performer. Its shares slumped 10 percent, the maximum allowed in a day. The real estate stocks are yet to regain their lost grounds. Market analysts forecast a fall in the value of real estate transactions in the coming weeks.
But, market players refuse to buy the slowdown theory. "Market fundamentals are strong and intact. What we are seeing right now is just a blip", Khalifa Al Muslimani, Qatar's leading real estate evaluator told The Peninsula yesterday.
"Media reports does not reflect what's happening on the ground. We are in the market and there are strong indications that market will continue to grow going forward. Deals worth millions of riyals are happening every week. Transactions with a value ranging from QR200m to QR1bn-QR2bn are going to be sealed in the coming months. Banks are continuing to fund various projects. If the market is volatile as media claim, how could the banks continue to pump in money to the market?"
"The massive infrastructure programmes would mostly stay immune to any financing shortages especially since Qatar was least affected amongst the GCC states.. However, there was a small chance that the private sector in Qatar might be exposed to some of the risk brought about by the falling oil prices as some planned oil and gas developments have either been posted or cancelled. The risk is believed to be minimal", Ahmad Jassim Al Jolo, chairman of the board of The Qatar Society of Engineers (QSE) was quoted as saying in a report published by global audit firm Deloitte.
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