One of the most discussed subject in the expatriate community is the rental crises and the spiralling prices of rents.

What started in 2004 as a simple supply/demand problem by 2005 turned into a seemingly unstoppable continuous increase in the rental prices affecting everyone in Qatar in one way or another.  A great number of new projects and the overall booming economy of Qatar means that there is a greater and greater number of people coming into the country, while at the same time demolishing of a large number of old buildings to make space for the new developments meant that there was suddenly a severe shortage of available apartments and villas on the market.

By the beginning of 2004 prices for all new available units on the market started to steadily increase.  Other landlords got caught in the fever and by 2006 rental prices tripled and in same cases quadrupled within the period of two years.  Of course, a fair amount of market speculation was to follow, with a mushrooming number of real-estate agencies and dealers pumping the prices even further.  Most agencies and landlords now even refuse to sign contracts for periods longer than six months, so that they can keep increasing the rent.

While all this could be explained as a teething problem of the rapidly booming economy, it brought an incredible hardship on some long residing expatriates in the country, especially ones in the middle-class income bracket.  Expatriates who were given fixed housing allowances in their contracts suddenly found themselves unable to even cover the rental costs let alone live normally.  Many resorted to sending their families back home and sharing accommodation, while a great number of others left the country all together, unable to make ends meet.

Monthly Property Rental Comparison

2 Bedroom Apartment (Furnished)
2003 – QR 1,500 to 2,500
2004 - QR 3,500+
2006 – Up to QR 6,000
2008 – QR 7,500 to 8,000+

3-4 Bedroom Villa (Unfurnished)
2003 – QR 4,000 to 5,000
2004 – QR 6,000 to 7,000
2006 – Up to QR 15,000
2008 – QR 18,000 to 20,000+

3-4 Bedroom Villa (In a Compound)
2003 – QR 7,000 to 8,000
2004 – QR 9,000 to 10,000+
2006 – QR 15,000 to 20,000
2008 – QR 18,000 to 20,000+
(Note: 1 US$ = QR 3.65)
 

It has been said however, that the increase in rent for 2006 was largely due to the 2006 Asian Games. Nevertheless as prices continue to increase, the private companies struggle to provide housing for their employees and therefore have no alternative but to increase the prices of their products and services.  Qatar’s official inflation rate was nearing 14% - the highest in the region as a result of this problem.

Many people are constantly urging the Government to do something to mitigate the problem.  Having committed fully to the open market economy, there isn’t much that the Government can do, however they had issued a law inhibiting the annual rent increase to only 10% and now as of 2008 a 2 year rent freeze has been implemented.

Any further interference with the prices would perhaps ease the problem in the short term, but would most certainly create an even bigger problem in investor confidence in the long run. If the Government of Qatar was seen to control the market prices by a decree, what kind of message would that send to the potential foreign investors?

All that the Government can do is to encourage building of lower priced units by means of providing easy loans to local companies - for instance the Barwa Housing Projects which will offer 2,000 low cost housing units.

Whether or not this bubble will eventually burst is anyone’s guess.  There are a great number of building developments going on everywhere and there will be thousands of new apartments and villas available in the near future.  But, at the same time, the booming economy will need more and more people to serve it, so it is not clear if the supply will be able to meet the market demand.