Commercial oversupply may explain drop in Oman property sales

Oversupply in commercial properties may underpin a decline in the value of real estate transactions in Oman in the first quarter, according to one real estate agent.

The value of real estate transactions in the country declined by 2.5 percent to OR573 million ($1.5 billion) in the three months to March 31, compared with the same period last year, according to data released by National Center of Statistical Information (NCSI). It did not explain why.

Mustafa Hussein, owner of Property Shop, a real estate office based in the capital Muscat, said a drop in appetite for commercial real estate was probably behind the decline.

“Investors in this segment find less returns from commercial buildings from rentals since there are too many of them on sale, where [supply] outstrips demand,” he said.

Still, the total value of mortgages grew over the same period by 6 percent to OR 317 million. 

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“With borrowing interest rates still low, it is an ideal time for young buyers looking for their first homes,” Hussein said.

The cost of borrowing in Oman is an average 4.5 percent, according to the central bank.

A decline in interest rates, expected later this year via the Omani rial’s peg to the US dollar, may drive prices higher.

“It may create price bubbles in the property market that is not actually based on the real price of the real estates on offer,” Khalifa Jaidi, a financial adviser, told AGBI.