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Bahrain, Property Market Outlook, Winter 2016

Market shows resilience to end 2016

While it’s clear that the impact on household finances from the economic fallout will be significant this year, especially as inflation is forecast to end the year at 3.4%, up sharply on 1.5% from 2015, the full impact of this on household budgets appears to have been relatively subdued thus far, with residential rental budgets demonstrating a great deal of resilience and outperforming our expectations.

Despite the somewhat positive state of the residential rental market, the proportion of searches for villas continues to ebb and has now fallen to around a third of all searches, although the rate of decline appears to be slowing, hinting at a possible bottoming out of the market and perhaps more crucially at the continuing importance for households to contain expenses. That said, quality and perceived value for money continue to drive interest in newly launched schemes, suggesting that tenants are very much in the driving seat and can cherry pick from a range of options on the market.

In the office market, the overall number of requirements remains at, or close to, record lows. The limited activity in the market continues to be largely driven by internal relocation activity, although the bedding in of stability across the Kingdom has also helped the market settle. Given the cost conscious nature of occupiers who remain concerned about the economic prospects of Bahrain, there has been something of a surge in activity by serviced office companies.

Elsewhere, pressure on household budgets, stemming from job security fears and the general dent to sentiment given the low oil price environment, has to a large extent helped to keep retail rents in check. These were at risk of overheating given the retail sector’s apparent resilience in the first few quarters of the oil price shock.