Bahrain Real Estate Sees Constant Growth in Q2 2023

The Kingdom’s residential and commercial property sectors have benefitted from a raft of positive policy measures

Bahrain’s real estate market witnessed steady growth across residential sales, rents, and office spaces, according to leading real estate expert Savills. The economy saw an increase of 4.9 per cent in 2022, the country’s strongest growth in more than nine years, propelled by the non-oil sectors that remained robust in 2022.

In 2023, however, it is expected that the GDP will recede to 2.2 per cent due to the drop in oil production and prices and the slowdown in the non-oil sector, as per the Savills Q2 2023 Bahrain Property Market in Minutes update.

Residential Sales Market

The demand for villas exceeded the apartment sector, and the inquiry levels and transactions were concentrated across the mid-range segment. Despite this preference for villas, the capital values have remained at the same level during the second quarter, and rates are estimated at BD603 per sq m. However, values on a year-on-year basis have increased by 2.3 per cent.

The average capital values across the high-end villa developments have decreased by 1.2 per cent on a quarterly basis to stand at BD600 per sq m. This decrease in average values is attributed to the correction in pricing across villa developments in Al Marsa Floating City.

Apartment values in the low-end segment have remained stable on a quarterly basis whilst the mid-end and high-end segments have decreased marginally.

Residential Rental Market

The demand for rentals across Bahrain has remained mostly stable in Q2 2023. Whilst rental values haven’t moved much on a quarterly basis, those for low-end and mid-end apartments have decreased by 2 per cent to 6 per cent when compared to Q2 2022.

As of Q2 2023, the low-end villa rental prices have risen by 10.3 per cent. The figures were BD800 per month for low-end villas and BD1,088 per month for mid-range villas. Meanwhile, the average monthly rental for high-end villas has stayed steady at BD1,294, whilst rates for high-end apartments are anticipated to be BD655.

Hashim Kadhem, Head of Professional Services at Savills in Bahrain, pointed out that the kingdom's residential and commercial property sectors have benefitted from a raft of positive policy measures, including the Economic Recovery Plan, the issuance of the Golden Licence, and the national jobs plan. “However, recent estimates suggest that the GDP will likely taper this year due to a drop in oil production and prices and a slowdown in the non-oil sector, which may also impact the property market to some extent, albeit with a lag,” noted Kadhem.

Office rentals market growing

As a result of the ongoing relocation of corporate occupiers to grade A developments, rental prices have increased by 1.6 per cent Q-o-Q across the high-end segment, at an average value of BD6.5 per sq m.

Despite the stability of rents across the mid-end segment on a quarterly basis, they have increased annually by 9.1 per cent at an estimated BD6 per sq m. “This annual increase in rents signifies the scarcity of space across the high-quality developments as well as the ongoing demand from corporate occupiers to lease space across such projects,” stated Swapnil Pillai, Associate Director – Research, Savills Middle East.

Savills has noticed that the capital values remained stable across the office development compared to Q1 2023. “There was also a noticeable uptick in demand for LEED-certified office spaces, demand for which is anticipated to see an increase moving forward as companies aim to meet their ESG goals and requirements,” Kadhem added.

Retail rental market

Retail rental rates have been under intense downward pressure over the past year, with prices falling by an average of 7 per cent to BD10 per sq m against the backdrop of the sector's ongoing recovery from the effects of the Covid-19 pandemic as well as a sizable supply and demand imbalance.

The biggest adjustment has been in malls, where prices are down 11 per cent year over year and average BD12 per sq m, down from BD14 last year.