ON the PULSE
time,” he says, “so, really, it is the one to watch over the next three to five years.” This said, an influx of foreign money into Qatar’s property market – and into its economy as a whole – has also resulted from changes in the regulations relating to foreign ownership of property in the Emirate, adding to the already short supply of rental accommodation there, highlights Matthew Green, head of UAE research and consultancy for CBRE, in Dubai. Until the enactment of Law 17 in 2004, in fact, non-Qatari nationals were not allowed to own or have long-term leaseholds on property in Qatar. Since the passing of the snappily-named law ‘Regulating Ownership and Usufruct of Real Estate and Residential Units by Non-Qataris’, though, foreigners have been permitted to invest in property for either their own use, or as a pure investment to rent to others. Although, as it currently stands, only three areas are available for freehold purchase (The Pearl, West Bay Lagoon, and the Al Khor Resort Project), there are another 18 areas in and around Doha that have been designated for foreigners to acquire the ‘right of usufruct’. This law allows the tenure of the initial lease for up to 99 years, and to be renewable, with the leaseholder also retaining the right to sell his lease or pass it on to his or her heirs. Wider Inflationary Pressure The longer-term future for Qatar’s housing and other daily living costs also looks increasingly expensive. Quite aside from the ongoing effects of all of the aforementioned factors, inflationary pressure across all aspects of local business landscape is likely to come from a massive US$100 billion (QR364 billion), according to the IMF boost in infrastructure spending up to 2016 initially, as part of the government’s stated priority of fully financing its budget from non-hydrocarbon revenues by 2020, and further spending in the run-up to Qatar’s hosting of the 2022 World Cup football tournament, highlights Green. According, though, to a statement last year by HE Sheikh Abdul Rahman bin Khalifa Al Thani, the Minister of Municipality and Urban Planning, Qatar will actually spend at least US$160 billion (QR582 billion) in the lead-up to 2022 on developing various
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elements of Qatar’s infrastructure, principally on upping the number and quality of available accommodation in the country, and on investing in the improvement of its major roads, port, airport, and metro system. Already, in fact, at least ten towers on the vast manmade island, The Pearl, has been either re-started or are likely to resume again, and Lusail, the 35 square kilometres city along the northern Doha, is also an example of renewed construction. Additionally, Damac is now pressing ahead with ground works, ready for its nine buildings in the Foxhills development. This is entirely understandable in light the embarrassment caused by a severe shortage of suitable housing in advance of the 2006 Asian Games that were held in Doha. “The problem with this type of spending is that it has to go somewhere, and in many countries – China is the most notable recent example – it tends to ultimately find its way into property, either through people up-scaling their rental living arrangements, or through buying outright at increasingly high prices, both of which are then passed onto the consumer,” says Nightingale. “The consumer, in turn, then has to place increased pressure on employers to fund this new cost, and this fires the flames of cost-push inflation across the board,” he adds. This said, the question of whether such housing will be sustainably suitable for other high-powered foreigners and locals to inhabit – rather than the sub-standard offerings which still languish unoccupied in Greece after its Olympics (before the current crisis hit), for example – seems to have been addressed to a degree with the recent creation of Qatar’s Urban Planning Department. Similarity To China? China’s example could prove to be highly pertinent for Qatar’s inflationary outlook, given that already, with just a moderate rise in Qatar’s government spending last year on non-hydrocarbon infrastructure projects, a study conducted by Saudi-based Samba Financial in early January of this year predicts that domestic credit growth in Qatar could hit 20 percent this year, well clear of any other GCC state. In China’s case, highlights Barden, the 11th and 12th Five Year Plans galvanised
around CNY10 trillion (QR5.4 trillion) in new infrastructure project spending, designed at the time to avert the worst ramifications of the then global recession. While this money was notionally intended for suitably sober-sounding initiatives (‘improving rural conditions’, ‘upgrading technology’, ‘energy saving efforts’, and ‘improving healthcare and education’), much of it ended up in less sociallybeneficial activities. “Money supply in China rose at a 40 percent rate in 2009 and the first half of 2010 as Beijing tried to maintain its stellar growth ambitions,” says Barden, “but a large proportion of this leaked into speculative activities, with domestic property values soaring by around 70 percent, and the domestic stock market jumping by about 80 percent in just the first six months after the first CNY4 trillion (QR2.2 trillion) extra economic stimulus package in March 2008 was announced.” The fact is, he adds, that such growth nearly always tends to militate into an environment of rising housing and food prices, just like that which presaged the Tiananmen Square protests, when food inflation in the month prior to the massacre was running at just over 18 percent year-on-year (yoy). In this context, in November 2010, although the overall Chinese CPI edged up to 5.1 percent yoy (against a government target of three percent maximum), food prices shot up by 11.7 percent. Additionally, like the worst sort of hangover, housing prices still continue to rise inexorably, with Lombard Street Research, in London, estimating that property prices in China are still around 22 times the level of disposable income in Beijing, and 18 times that in Shenzhen.
There is a possibility that excess supply in real estate would gradually converge with demands.