Population rise will push up rents

 05 Jan 2013 - 2:34

Qatar’s national office for statistics recently announced that the country’s population had soared to 1.83 million at the end of 2012, showing  7.5 percent growth over the previous year.

by Mobin Pandit


The growth, as we know, is driven by a huge influx of foreign workers who are needed for the mega development projects that are being launched for the 2022 FIFA World Cup.

The current year, market sources believe, might prove to be crucial in terms of population growth as work on a number of infrastructure projects is likely to begin, necessitating an added influx of foreign workers.

Anticipating that the pace of construction activity would be hectic this year, a real estate developer and investment expert said he expected an incredible 600,000 workers to arrive this year.

If that happens — and there is every chance it might — the country’s population could be pushed beyond the two-million mark well before the target year. 

Khalifa Al Muslemani, the expert, might prove to be right based on current statistics, because the country’s planners expected the population to reach only 1.76m by the end of 2012, but the actual figure turned out to be 1.83m, exceeding their forecasts.

Qatar’s National Development Strategy (2011-16) estimates the country’s population will reach 1.78m in 2013, 1.81m in 2014, 1.84m in 2015 and 1.86m in 2016 — the yearly growth rate being merely 2.1 percent.

“If you look at the NDS (National Development Strategy) projections and the current population (of 1.83m) we already are close to 2015-end,” said an analyst not wanting his name in print.

Independent projections about Qatar’s population growth trajectory suggest that the total might be 2.8m by 2020, given a slew of high-profile and highly labour-intensive development projects that are to be launched for the FIFA event.

The Qatar National Vision 2030 estimates, though, see the population reaching 2.8m by its target year (2030) — exactly a decade later, counting from 2020.

The argument here, according to analysts, is, “Are we prepared to handle a large and unplanned growth in the population considering that the country’s infrastructure is limited, and a sudden and extra pressure on housing, hospitals, roads, food, water and electricity might lead to problems like shortages and price rise”?

A worrying reminder in this regard is the sudden surge in the population the country witnessed between 2004 and 2008, which sent prices shooting up, led mainly by skyrocketing house rents fuelled by rising demand and restricted supplies made worse by large-scale demolitions for beautification.

No wonder, then, that prices have already begun going up, led by rentals, again, as the gap between demand and supply of housing is narrowing by the month if not week.

Significantly, a warning about house rents surging this year due to soaring demand has come from none other than the country’s planning officials.  The General Secretariat of Development Planning (GSDP) said late last month that the rentals that had sobered down after the 2006-08 highs were showing signs of an upswing, surging 2.2 percent in the latter half of 2012.

The GSDP estimates that in the second half of 2012 alone some 130,000 newly-recruited workers arrived in the country. Although the secretariat was silent on the issue of the increasing burden the rising population is putting on infrastructure, it is common sense to presume that rentals and commodity prices would show an upward trend due to soaring demand, argue analysts.

There are others, though, who argue that those coming in are semi-skilled and unskilled workers who need to be housed in labour camps. But labour camps are in short supply. This means that new ones with modern specifications are to be built, for which, again, workers would be required.

“In a nutshell, an increasing population is bound to put pressure on utilities, food and healthcare facilities, if not on general housing, and this triggers price rise,” said an analyst.

The reality, according to market sources, is that not all newly-recruited workers who are arriving are semi-skilled and unskilled. “Even if we say they constitute 90 percent of the new arrivals, the remaining 10 percent are skilled workers and professionals who would be bringing along their families and needing regular housing,” said a source from the construction industry. 

“So the demand for housing would go up. And don’t forget that an increasing number of foreign companies are setting foot in Qatar and are bringing in workers, too, and many of these workers are technical hands and professionals,” said the source.

Right now, as far as housing is concerned, supply still exceeds demand. “But the situation may reverse by the year-end,” warned a real estate sector source. “We are getting a lot of enquiries and the demand has been growing.”

Asked to cite figures to substantiate his argument, the source said that some six months ago, they used to get four to five enquiries for housing a day, and that number had doubled.

He said many owners of apartment or villa clusters were still holding on to their newly-built stocks, waiting for the rentals to go fairly up and to lease the entire stock to a company. “It’s easier if you give away a building or a cluster of villas on long lease to a reputable company, preferably a state-owned entity,” said the source.

Presently, though, the demand (for housing) is more from individuals, and companies are still waiting for mega projects to be announced so that they can go on a recruitment “spree”, said the real estate industry source.

Construction industry insiders say the bigger players among them are keen to bag lucrative contracts in the development projects where the money is, and are, therefore, leaving it to smaller companies to build more housing stocks to cater to a rising population.

While that may or may not be true, the fact is that the demand for land has been going up and land closer to development projects, including proposed metro rail stations, is attracting a premium.

Not surprisingly, then, real estate transactions totalled an incredible QR42bn ($11.5bn) in 2012, up 59.1 percent over the previous year, figures released by the real estate registration department of the Ministry of Justice reflect.

Experts believe that as mega projects are announced this year, real estate transactions might go up feverishly and even touch or breach the magical mark of QR75bn ($20.54bn) by 2013-end.

An idea of the demand for land at prime locations can be had from the fact that their rates are now being quoted in square feet and not in square metres. Another building industry insider said that he had been in Doha for 35 years and never ever heard the price of a plot of land quoted per square feet. “It has always been in square metres,” he said.

“It signifies two things — land is becoming a more valued commodity, and that it would be used pragmatically,” said the insider. “Do you any more see large living or bed rooms or balconies in apartment buildings or even villas, which was the case earlier? This shows that land is becoming costlier and construction costs are also going up so developers want to maximise profits as margins are low.”

Citing an example, the construction sector insider said that land near the upcoming Doha International Airport was in high demand and its rates were quoted in square feet.

All these are indicators that a price rise fuelled largely by spiralling rentals is inevitable in the coming period. There is the fear of imported inflation as well, say analysts, arguing that being a net importer of food Qatar would have to import more food to feed the rising population.

The GSDP has, however, allayed such fears and said that it actually does not see a repeat of 2006-08 when prices zoomed up weighing down on the common man. “The risks of sharp rent increases of 2006-08 are remote.”