Q209 Qatar Real Estate Report

Dubai, UAE - June 8^th, 2009: Today, Landmark Advisory released the Q209 Qatar Real Estate Report, which analyzes the significant changes taking place in Qatar's property market. In addition to the economy and banking, the report features a special analysis that compares housing demand to population growth.

The supply and demand fundamentals of Qatar's property market are changing rapidly. For years, Doha's residential market had a significant housing shortage. "But that situation is about to reverse," said Jesse Downs, Landmark Advisory's director of research and advisory services. "The assumption was that Qatar's booming economy, based on petroleum exports, had attracted large inflows of expatriate professionals. However, this assumption does not bear close scrutiny," explained Downs.

Petroleum accounts for roughly 70% of Qatar's GDP, but it employs only 5% of all expatriates in Qatar. Construction, however, employs 45% of all expatriates, but it accounts for only 5% of GDP. Ms Downs explained that "Since most construction workers live in labour camps, they do not contribute to demand for housing. So, it is misleading to assume that Qatar's recent population growth is matched by a comparable increase in residential demand."

The report shows that between mid-Q408 and end-Q109, average freehold sale prices fell 25%-30%. "The declines were heavily weighted toward The Pearl, where average unit prices dropped 35%, indicating a sharp fall in demand from foreign investors," said Downs. Average prices for units in the Zig Zag Towers and Lusail also declined, but only 10%-15%.

Turning to the rental market, average villa rents fell 15%-20% in the first two months of 2009, while apartment rents remained stable. Ms Downs explained that "compared to Q408, when average rents fell 5%-10%, Q109 shows us that apartment rents are more resilient, especially for smaller units, while villa rents are subject to considerable depreciation."

In terms of mortgages, lending to expatriates has become increasingly uncommon and carries prohibitive restrictions. LTV ratios and loan periods have fallen, while minimum salary requirements have risen considerably. "In the year ahead, liquidity will be problematic for Qatari banks, whose loan-to-deposit ratios exceed 100%," said Downs. "Despite government intervention, excessive lending and poor risk management have left Qatari banks over-exposed to real estate assets, which are now depreciating due to falling demand."

Ms Downs also described how soaring revenues from petroleum caused a real estate bubble in Qatar. "The capital glut caused extraordinary inflation and subsequent de facto negative interest rates. The result was a real estate bubble inflated by a positive feedback loop. Negative interest rates encouraged widespread borrowing for property investment, which caused inflation to soar and, therefore, worsened the negative interest phenomenon. This prompted even more borrowing and real estate speculation."

The Q209 Qatar Real Estate Report is available for free at www.landmark-advisory.com

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