Pressure on Bahrain’s residential property market as supply grows

Reuters/Hamad I Mohammed

• Supply to increase 7%
• Affordable villas selling
• Q1 GDP up 3.3%

Bahrain’s real estate sector is undergoing notable shifts as the residential market contends with stagnant prices and an increasing supply of units.

With demand failing to keep pace with supply, experts warn of potential price drops if current trends persist. 

Real estate services and investment firm CBRE Middle East estimates indicate that the freehold apartment stock available to international investors currently stands at approximately 19,356 units.

An additional 1,361 units are expected to enter the market by the end of the year, an increase of 7 percent.

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Without a substantial increase in demand, there is likely to be downward pressure on apartment prices. This would cause rates to stagnate or more subdued absorption rates, ultimately leading to lower sales rates, CBRE said.

However there was an 8 percent year on year increase in villa sales on a square metre basis compared to 2023, driven by demand for affordable units among local buyers.

“Residential market performance has been mixed in H1, consistent with the significant existing and pipeline supply in the market,” said Samantha Schiffman, senior analyst in Bahrain for CBRE Middle East.

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The trend was also evident in the office sector, which has seen a slowdown in H1 2024. Average rental rates declined by 3 percent year on year due to excess supply outpacing demand.

Despite challenges in the retail market, new openings persist, but average occupancy across CBRE’s tracked properties fell by 2 percentage points to around 70 percent, partly due to the launch of the Marassi Galleria mall in February.

Prime malls maintain high occupancy, with rental rates averaging BD21.5 ($57.2) per square metre, while the market average is BD11.5 ($30.6).

The hospitality sector is buoyed by an expected surge in tourism, thanks to the capital Manama’s recognition as the GCC tourism capital for 2024. Hotel performance in Bahrain improved year-to-date to June, with occupancy up 7 percentage points, and average daily rates rising by 2.6 percent.

According to the latest figures from the Information and eGovernment Authority, Bahrain’s real GDP grew by 3.3 percent in Q1 2024, emphasising the importance of diversifying away from oil dependency.

The government is making substantial investments in infrastructure to support economic growth. In July 2022, a $1.1 billion passenger terminal, capable of accommodating 14 million travellers annually, opened in the capital, marking a key development in boosting tourism.