Sudhakar Reddy, CEO of Al Habib & Co. speaks about the latest trends, investment opportunities and challenges in Oman’s real estate sector. Excerpts from an interview
Real estate has over the years become an attractive investment option and a common investment vehicle. Has Oman’s property sales market been affected by the current market sentiment?
Oman’s real estate returns are volatile unlike those from non GCC countries where the returns are steadier. This is because the overall nominal GDP (which is a better measure than the real GDP) grows and shrinks with oil prices. Right now although oil prices are up compared to where they were last year, the average oil price over blocks of 5-10 years is a more reliable indicator of how the economy is performing and hence how real estate is performing. By this measure we are still in a period of low oil prices as the average oil price post mid 2014 is about half of what it was before that. Therefore, the softness in real estate prices at the moment. However, returns from real estate are to be measured over a long span as real assets last decades. By that measure, we are at a lower point in real estate prices compared to their average and the next few years will be a good time to invest in real estate.
As you rightly said, real estate prices are tied to oil prices in the Sultanate. Will the recovery in oil prices boost the investor confidence?
I have explained the linkages with oil earlier. However, the government is pushing hard on diversifying the economy and we can expect the correlation of real estate with oil prices to diminish over a period of time.
Can you talk about the latest trends, opportunities and challenges in Oman’s real estate sector?
Real estate is a bit like stocks. It is not that all stocks go up equally. One has to pick the right stocks. Similarly, one has to pick the right real estate asset. Right now the highest values are in real estate in Muscat. Within Muscat, the city is moving towards the airport and beyond and we can expect property to appreciate in location beyond the airport and decline in the older areas of CBD/MBD, etc. However, the water front project may revive interest in the old part of the city. The challenge at the moment is to pick the right asset and ride out the downturn.
What is your future outlook for 2019 and beyond? Do you thinks prospects are still bright for domestic and foreign property buyers In Oman?
I expect real estate prices to be subdued in the next couple of years and if one invests in the right assets now, one can enjoy good returns in future.