DOHA, Qatar - The oversupply of real estate in Gulf countries which has seen a collapse in property prices, commensutate with similar falls in rents, has hit across the region, none worse though in Qatar,
Like all Gulf countries, Qatar has pushed the envelope, building far more villas, apartments, commercial office towers, hotels and malls than there is demand for, but its situation has been exacerbated by additional supply being generated for the 2022 World Cup. A similar situation has occurred in Dubai which is to host Expo2020 from October next year.
Ratings agency Fitch says rentals in Qatar have fallen 20% over the past 3 years, again similar to Dubai and Abu Dhabi, and echoed around the rest of the region.
Qatar's situation however is unique. While the region's property market is depressed, the tiny gas-rich country is being subjected to a blockade by its Gulf neighbours. Saudi Arabia, the UAE, Bahrain, and Egypt have boycotted the country from a trade and diplomatic perspective since 2017. The U.S. has been trying to broker a resolution to the situation but to no avail.
Aside from its real estate woes, Qatar's banks were put under pressure by the breakdown in relations, however they have since recovered. When the crisis first hit, there was a run on Qatari banks which saw around $30 billion in deposits withdrawn. The government of Qatar however stepped in, injecting around $40 billion in new liquidity. Now the sector could be facing more trouble.
Fitch sees the real estate sector as an "increasing risk" to the banks.
"Qatari banks’ concentrated exposure to the weakening domestic real estate market is an increasing risk to asset quality," Fitch said, nominating Doha Bank, Commercial Bank, and International Bank of Qatar as the banks facing the most risk.
"The real estate and hospitality sectors, already facing falling prices due to oversupply in preparation for the 2022 World Cup, have been further pressured by reduced tourism and occupancy rates resulting from the boycott of Qatar," the Fitch statement said.
Fitch said despite the risks it was not lowereing the credit rating of Qatari banks as it fully expected the government would continue to support them.
(Photo credit: Mubasher).