High volume of apartments has entered the Bahrain real estate market over the past three years with a further 7,500 units expected in the next five years, leading to a supply and demand imbalance. Investors would buy an entire residential floor with an intention to rent it with yield expectations of more than 8 percent. However, given the lack of demand in the rental market, there has been a consequential impact on the freehold off-plan sales market. The low-end fared the best with a minor price decrease year-on-year of 0.7 percent compared to drops of 3.9 percent and 4.8 percent for mid and high-end apartments respectively during Q3. the past few years have seen a readjustment of living patterns following an increase in energy costs which resulted in a shift from larger to smaller units, largely limited to the villa segment and even more so for those rented on an exclusive basis.
Residential rental rates will continue to decline for the remainder of this year across apartment and villa projects with the high-end segment facing the most pressure. This is mainly due to more households constricting their budget on the back of subdued economic outlook in addition to uncertainty surrounding employment in the private sector and salary reductions. Despite an oversupply which has stretched for several years, a number of newer developments have come online over the past couple of years, putting occupancy and rental rates under pressure. Occupiers are expected to analyses their office requirements with a strong probability of downsizing as more flexible working conditions are offered to employees. These trends were seen emerging globally with companies such as Twitter and Fujitsu allowing staff to work from home or the office dependent on their convenience.