Property prices in Bahrain increased by up to 600 per cent over the past four years. But there are now signs of a downturn in the luxury end of the market, according to a report.

The rise in house prices has been mainly on account of demand outstripping supply as most new residential properties in Bahrain focused on the high-end segment, said the report from Kuwait-based Global Finance House.

Manama, where the majority of the population is concentrated, has experienced Bahrain's highest property price growth, at around 400-600 per cent over the past four years, the report states.

Prices in other areas have climbed about 250 per cent to 400 per cent.

However, the prices are showing signs of moderation now amidst the financial crisis.

With tight liquidity, market sentiment towards property investment had declined which has led to lower transaction volumes in the residential sales market.

The Mazaya real estate price index for Bahrain has fallen continuously in the fourth quarter last year to record a decline of 10-12 per cent in residential and commercial land categories.

Yields are estimated by local realtors at around 10 per cent, given the shortage of properties for rent and strong demand.

The rental market is almost entirely foreign-driven, and has grown substantially since the increase in US army numbers, who live largely in Juffair.

More recently, the high level of economic activity in Saudi Arabia has meant a substantial increase in new residents, who drive across the causeway rather than live in Saudi.

But the global economic slowdown and fall in oil prices has led to substantial wealth erosion, according to the report.

'With tightening of liquidity, project finance has become difficult and investors are hesitant to enter the property market. As a result transactions are coming down,' the report said.

'However, the majority of new homes in Bahrain have been bought by owner-occupiers and speculator activity had been limited to the luxury segment.

'Due to this, speculator activity will be curtailed and only genuine long term investors would remain in the market.

'Developers will we forced to meet timelines and at the same time provide quality residential projects to attract property investors.

'Focus will shift to end-user buyers, particularly in the middle-income bracket that had been poorly served during the boom years.

'Prices are likely to come down in the premium housing category by 15-20 per cent as developers try to offload their properties into the market,' the report adds.

'But in the middle income bracket prices are likely to remain firm and may even grow by 10-20 per cent as indigenous demand would remain strong due to the growing young population,' it said.



Source: Trade Arabia News