Qatar’s non-oil sector up but real estate slows

Reuters/Kai Pfaffenbach

• Outlook for non-oil sector remains positive for coming year
• Fall in demand for houses after World Cup construction boom
• Tourism up but hotel occupancy percentage down due to oversupply

Business conditions for Qatar’s non-oil private sector continued to improve in July.

However there was a lack of demand for real estate following previous growth in construction that was linked to the Fifa World Cup.

Output, new orders, employment and purchasing all expanded, with Qatar’s latest Purchasing Managers’ Index (PMI) reaching 54.0 in July, up slightly from 53.8 in June.

It remained well above the long-term trend of 52.3, according to new research by Qatar Financial Centre and ratings firm S&P Global. 

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Output has risen every month for more than three years, except for a brief correction in January following the conclusion of the Fifa World Cup Qatar 2022.

The 12-month outlook for the non-oil private sector also remained positive in July.

Higher expected business volumes were linked to new sales strategies, hires, tourism and products.

July data also signalled another increase in non-oil private sector employment, at the fastest rate since July 2022.

Recruitment was aimed both at new workloads and efforts to clear backlogs, which were reduced for the 12th successive month.

Qatar’s financial services sector also continued to expand. Employment rose at the strongest rate in 14 months while new business increased at the second-fastest rate in nearly a year.

Yousuf Mohamed Al-Jaida, CEO, QFC Authority, said “financial services remains a strong point for the economy”.

Property demand falls

However, Qatar’s housing market faces challenges as a fall in demand for residential properties is coupled with a rise in supply following the construction boom linked to the World Cup, according to a report published this week by real estate consultant Knight Frank.

“The supply-demand imbalance, rising interest rates, and affordability challenges are contributing to a shrinking mortgage market and impacting the volume of home sales, while also undermining residential values,” said Faisal Durrani, partner, head of research, Middle East and North Africa.

The total number of residential sales transactions has fallen by 36 percent over the last 12 months while the total value of residential transactions has declined by 24 percent, Knight Frank’s research showed.

With rents dropping in the majority of areas, Lusail’s Waterfront and Fox Hills experienced the highest quarterly depreciation of average apartment rents, falling 23 percent and 18 percent, respectively.

Qatar’s office market also experienced a widespread drop in average rental rates.

Adam Stewart, partner and head of the Qatar office at Knight Frank, said the Gulf state’s biggest challenge is an oversupply of office space.

The public sector is driving most of the activity in Qatar, particularly in Lusail – a recent example is Qatari Diar’s 6,200 sq m lease at QFC Authority’s Lusail Boulevard.

Despite Qatar’s tourism sector recording a significant annual increase of 206 percent in visitor numbers – reaching 1.77 million during the first five months of 2023 – average occupancy fell from 58 percent to 53 percent over the first half of the year, highlighting rising hotel stock and supply overhang from the World Cup.