Rental growth for the remainder of this year may be "limited" as a significant amount of apartments are scheduled to complete by the year end, a report by leading property management company Asteco shows.

“Although on average, only marginal rental increases were witnessed across Qatar’s residential locations, strong demand for one and two-bedroom apartments pushed their rental rates up by 8% in the second quarter compared with Q1” the report said.

“Demand for one-and two-bedroom apartments is now beginning to outstrip supply in various locations, particularly in the Diplomatic District and the Pearl-Qatar, both offering good quality accommodation, something tenants from mature overseas markets will not compromise on,” said Asteco Qatar managing director Jed Wolfe.

“If demand continues to grow at this pace, the market could acquire a healthy supply and demand balance particularly in the one- and two-bedroom category,” he said.
The highest average rental rate for either a one- or two-bedroom apartment at the Pearl-Qatar in the second quarter was QR9,750 and QR13,000 a month respectively.

The lowest rents were found in Najma where one-and two-bedroom apartments averaged QR3,625 a month and QR5,125 a month, respectively.

Overall, average villa rental rates were also up 4% due once again to supply and demand dynamics.

The most expensive area, West Bay Lagoon, averaged QR23,500 a month for a four-bedroom villa, while in Al Khraytiyat a similar property costs QR9,750 a month.
“The most modern, high quality and well serviced compounds, are now developing waiting lists for prospective tenants, such is the demand,” Wolfe said.

“The residential sales market witnessed no material change in the second quarter, enquiry levels remained constant, but with a marked increase for one-and two-bedroom apartments, following the rental trend. That demand predominantly came from individual Qatari investors using property as an alternative to holding cash reserves,” he said.

“The smaller unit sizes also allow investors to limit their risk, by depositing limited equity, when using a mortgage to finance the purchase.”

One major news story recently was that United Development Company (UDC) the developer of the Pearl-Qatar, announced that it planned a reduction in the master community service charge of around 33%.

“This reduction is due to take effect imminently and when combined with the possibility that Qtel could acquire the full communications network to offer voice, broadband Internet and TV entertainment, will have a positive effect on investors through lower operational costs and added value for tenants,” said Wolfe.

Rental rates for offices “remained static” with no significant movement since the first quarter of the year.

However, continued supply through to 2013 will still outstrip improved demand especially from companies involved with infrastructure projects.

Currently, fully fitted offices under 500 sq m in good locations are most sought after. West Bay continues to lead the market, commanding QR195 per sq m a month, the report said.