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ASs a sure sign the effects of the global economic storm that hit the region's real estate sector hard is spreading to Bahrain too, a joint venture between South Africa's Murray & Roberts (M&R) and Bahrain's Nass Corp has lost a $545-million building deal.
Nass says Sama Dubai, owned by the ruler of the emirate, had terminated the contract covering the Salam resort, a luxury beach-front project close to the Bahrain Formula 1 track.
The Dubai company did not give a reason for the termination in a letter to the joint venture.
It is the latest in a string of projects to be cancelled or delayed in the region and the second M&R has lost in as many months. In December, its key Trump Towers Dubai building project was scrapped.
Bahrain until now has not been as badly hit by the global financial crisis, but it is beginning to feel the effects as projects financed by banks and developers from the rest of the region are being delayed.
Recent studies have indicated that Bahrain's residential property market is showing signs of slowing.
Sale prices for apartments in a number of residential towers in Bahrain showed signs of moderation in the fourth quarter of last year - an indication that the downturn in the global economy is starting to bite and is leading to lower transaction volumes.
This bodes well for the prospective purchaser keen to invest in increased value-for-money accommodation in the island kingdom.
Compounding the economic factors for developers, is the large number of residential construction projects that have recently become available offering buyers a wide product range.
Residential developments launched for sale in the last quarter of 2008 alone included Raffles City at Bahrain Bay, Difaaf, Mina Dar Al Salam, Venice Apartments at Reef Island, Aya Tower, Amwaj Waves and Delmar.
According to property services company, Asteco's fourth quarter research report, these developments recorded average sales prices ranging from BD950 to BD1,800 per square metre, with Raffles City at Bahrain Bay commanding the highest sales prices because of its prime waterfront location.
Sales of office space in Bahrain continued to grow with the launch of new commercial towers including West End in Seef, Signal One in Amwaj Tower and Times Square in the Diplomatic area. Sale prices of these towers range between BD1,500 to BD1,800 per square metre. The main reasons driving demand is the shortage of quality office space, especially in the Seef District, where several multinational and banking groups are located.
Developers are likely to face tough competition in 2009 for sales transactions amidst the current economic climate and a move towards more flexible payment plans is thought to be inevitable.
This will be another advantage for potential buyers, as will the expected future delivery of higher-quality residential and commercial projects from developers to attract property investors.
Andrew Chambers, managing director of Asteco, observes that the market in Bahrain is now providing a prime opportunity for investors to purchase good value, quality projects in the country.
"The current economic climate has undoubtedly affected markets in the GCC region because of the tightening of credit availability," he says. "As a result, sales transactions have stabilised as investors are proving hesitant to enter the property market during these challenging times. However, Bahrain is well-positioned to overcome the current economic downturn and this scenario should be regarded positively as a good time for a market correction to take place," he adds.
One significant attraction for would-be investors in Bahrain is its commitment to achieving a prosperous and sustainable future, as outlined in its 2007 National Plan.
The blue-print is the first comprehensive land-use strategy to assess the nation's planning requirements for the next two decades and has been formulated with the overall aim of transforming the Gulf state into one of the world's most highly regarded island nations.
Future developments encompassed within the National Plan include Durrat Marina; a 21 sq km master-planned development that will span three islands and comprise a total land mass of 600,000 sq m. Meanwhile, consolidation between property developers across the Gulf will gather momentum this year on an unprecedented scale.
Two Qatari property firms, Qatar Real Estate Investment Company (QREIC) and Barwa Real Estate, are in the early stages of a merger following an order by the government to join forces.
The two firms have a combined market capitalisation of $2.47 billion. The merger is in line with "the state's policy in investment and aims at generating a higher rate of return on investment in Qatari shareholding companies while enriching the national economy and supporting the economic development in Qatar".
The merger comes at a time when property prices in some areas under development in Doha have fallen by up to 40 per cent.
Still, with a strong cash surplus and a rise in gas exports expected to provide a significant income stream, Qatar's economy is expected to expand by 10 per cent this year, outperforming other GCC countries.
