THE IMPACT OF EXPATS ON THE REAL ESTATE MARKET

Qusai Aizouki
Managing Director
BCS Management Co.

The real estate market in Bahrain is highly dependent on expatriates, especially in terms of leasing, because Bahraini citizens prefer to live in different areas than what foreigners would choose, such as Juffair and Amwaj, but tend to buy in other areas relevant to them. The generous government of Bahrain offers private loans to citizens, such as housing benefits, and the government’s tireless efforts to secure housing for Bahrainis have significantly reduced Bahrainis’ demand for rent.

With a quick look at the real estate market in Bahrain, we can find an increase in supply due to the continuation of the construction of new projects and the end of the crisis of some stalled projects, but on the contrary, we notice a significant decrease in demand for real estate due to the departure of a large number of expatriates from the Kingdom over the past three years. This caused a decrease in the rental value by more than 30 percent in some areas, and thus a decrease in the value of the real estate, especially the old ones, by 40 percent in some areas.

According to reports issued by the General Authority for Social Insurance in Bahrain, the number of foreigners registered for insurance decreased by 17 per cent from the first quarter of 2018 to the fourth quarter of 2021 (from 503,791 to 419,438) due to several factors, most notably the pandemic, which greatly affected the expatriates, as a large part of them lost their jobs or preferred to spend the period of closure that swept the entire world in their original homeland. The other reason for the departure of expatriates is the high cost of living compared to income, especially the significant increase in basic facilities such as electricity and water, in addition to the application of the value-added tax to goods and services, and the government’s adoption of a policy to employ local citizens to reduce the unemployability rate in the Kingdom.

Stagnation in the real estate sector in Bahrain, and the changing the lifestyle

Families have started to move from larger housing units to smaller units and are away from committing to long-term lease contracts for fear of the unknown in light of the economic decline.

The real estate investment sector has witnessed great pressure during the pandemic, especially with the increasing number of expatriates leaving the Kingdom, which resulted in more vacant apartments in expatriate neighbourhoods such as Juffair and Amwaj.

The real estate market consists of several sections, including selling, buying, leasing and joint real estate, and if one of them is affected, they are all affected at once, even brokers, investors and customers are affected by supply and demand. Preeconomic decline, properties of various types were displayed for a period not exceeding two months to be sold or rented, but in the past few years the period has extended to 6 months and may reach a whole year in some cases, and we find many buildings in Juffair or Amwaj with an operating rate of not more than 50 percent. As for the joint properties that are subject to the owners’ union system, the owner is finding it difficult to pay the union fees because the property is devoid of tenants and therefore the lack of income from the invested property, creates many financial problems on the wonder behalf.

By 2022, real estate agents expected the market to resume its activity, although a recovery period needs at least 2-5 years, as the COVID-19 epidemic had a clear impact in reducing movement and lowering real estate prices in freehold areas after many foreigners preferred to return to their countries. The lack of non-Bahraini (foreign) investors, as well as the decline of expatriates wishing to own property due to the weak economic feasibility of investing, and the fear of a decrease in the price over time have all made a serious impact on the real estate market in Bahrain.

This article was published as part of the eighth edition of Property Finder Bahrain’s Trends Report.