Sultanate of Oman

Muscat Property Insights Q1 2011

RESIDENTIAL - RENTAL
The first quarter of the year saw healthy and increased activity in the residential leasing sector. Demand was
sustained for all types of property, particularly villa options within the new ITC developments. Rentals remained
under pressure to some degree owing to corporates generally tightening their housing budget allowances. The move
of many companies away from the traditional ex patriate package which included housing allowance to an all in
gross salary has resulted in tenants becoming increasingly demanding in terms of value for money. Values for most
property types appear to have reached their true levels and further declines from existing rates are not predicted
over the next quarter.
Values as at end Q1 2011 are reported as


Whilst medium level apartment rentals have held firm over the quarter, there is likely to be some downward pressure
throughout the rest of the year owing to the completion of a significant amount of new stock. With some larger
companies developing their own staff accommodation, release of formerly rented apartments into the market could
potentially result in an oversupply and a consequential softening of rents.

The impact of the new Integrated Tourism Complexes, The Wave and Muscat Hills Golf & Country Club particularly has
been significant for the rental market. With both these developments offering high quality housing options in managed
communities, rents consistent with those prevailing in more central areas continue to be achievable and demand
remains high. As the enhanced facilities of hotels, shopping and recreational amenities are completed in both these
developments we predict that there will be healthy rental growth and values will outstrip those of the central areas.
Older housing in the traditionally favored areas that has not been upgraded to modern day standards is now failing to
rent quickly and vacancy rates are climbing.

0
500
1000
1500
2000
2500
2 Bed
Apartment
3 Bed
Apartment
3 Bed
Townhouse
4 Bed Villa 5 Bed Villa
Q1 2008
Q1 2009
Q1 2010
Q1 2011
Todays Rents (monthly)

2 Bed Apt RO. 400
3 Bed Apt RO. 500
3 Bed Townhouse RO. 850
4 Bed Villa RO. 1150
5 Bed Villa RO. 1500

For quality homes in central areas
Excluding ITCs

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COMMERCIAL RENTAL
As previously forecast, the market is now facing an acute over supply of office space. With the completion of
approximately 180,000 square meters of new space over the last 6 months, the market has seen considerable value
erosion. Rents have declined by up to 50%from their peak rates of 2007/2008 and much new space continues to lie
empty awaiting first occupancy. It is estimated that up to 45%of all new space will remain unoccupied in the medium
term and only that space with adequate car parking and high quality facilities will lease even at these deflated rental
levels.
From an international perspective, Omans commercial market had been intent on positioning itself as a viable
alternative location to its neighboring GCC countries. With Muscats rental levels less than 12%of those in Londons
West End and approximately 18% of what is payable in Mumbais Nariman point, the economic logic for an inward flow
of back of house and administrative functions was sound. However, concurrent with the decline in Omans rentals was
the general global economic slowdown which effectively put on hold the targeted major international company growth
plans.
Choice of office location has traditionally been driven by the prevailing rents in the micro commercial zones throughout
the Capital Area. Owing to the current oversupply, it is forecast that this will now change and rents will even out
throughout the City and more reflect the quality of space and amenities on offer rather than the location of the space.
Several larger corporate relocations over the last year including Bank Muscat to Airport Heights and Omantel to Al
Mawelah have shown that the traditional central areas no longer hold the importance they once did. Ghala continues
to undergo its transformation from an industrial zone to a viable office location and with some massive campus style
developments planned over the medium term including the ambitious Convention Centre development, the outward
shift in area preference is likely to continue.
Despite the much discussed over suppy, there still remains a relative undersupply of quality new office space in smaller
module units. The average office space module currently on offer in Muscat is 260 square whereas the highest demand
is for units below 150 square meters. Future developments that can provide such smaller spaces are likely to see
acceptable levels of space take up.

RepresentingOmani Rials Per Square meter per month
0
2
4
6
8
10
12
14
16
2005 2006 2007 2008 2009 2010 2011
Ruwi CBD
Qurum
Shati al Qurum
Al Khuwair
Azaiba/Ghala

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INTEGRATED TOURIST COMPLEXES - FREEHOLD
The impact of the global financial crisis was felt acutely by the ITCs and it is only now, when homes are being occupied
that the values are finding their correct levels. With a virtual disappearance of the speculative purchaser the market is
now firmly either owner occupier or rental investor based with increasing levels of demand being seen.





The Wave Muscat
Good occupancy levels are now achieved with the exception of release 4 which is ongoing. Rental demand is high and
re sale activity for completed product is sustained. Demand is likely to increase upon completion of the marina
boulevard and when the hotel presence is achieved. Values currently attainable:
2 Bedroom Apartment RO. 140,000 sale / RO. 800 pcm rental
3 Bedroom Townhouse RO. 160,000 sale / RO. 900 pcm rental
4 Bedroom Villa RO. 230,000 +sale / RO. 1,400 +pcm rental
5 bedroom Villa RO. 285,000 +sale / RO. 1,750 +pcm rental

Muscat Hills Golf & Country Club
Phase one handovers are complete and occupancy is fast underway. Despite
a slow start from a leasing perspective, word has quickly spread about this
unique family orientated lifestyle community and space take up is now
rapidly gaining pace. Prevailing values commence from:
2 Bedroom Apartment RO. 135,000 sale / RO. 600 +pcm rental
4 Bedroom Villa A and B RO. 300,000 sale / RO. 1,450 +pcm rental
5 bedroom Villas C & D RO. 420,000 +sale / RO. 1,700 +pcm rental
Yield returns from property at Muscat Hills have evened out and now show
an approximate 5.5%gross return to value. Based on original purchase price
off plan, the properties are showing their owner investors upwards of 10%
gross return per annum.

0
2
4
6
8
10
12
Original
Purchase Price
Current Value
Apartments
Penthouses
Villas
Gross Yields in percentage

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Jebel Sifa and Salalah Beach by Muriya Tourism are fast approaching their hand over stages with expected first
occupancy by the year end. Developments still earmarked for launch in 2011-12 include, Naseem aSabba, Omagine
and Saraya Bander Jissah. However, taking into account the current economic conditions it is considered highly likely
that developers will delay their launches as long as possible until market conditions are more favorable.



0
2
4
6
8
10
Original
Purchase Price
Current Value
Apartment
Townhouses
Villas
0
100000
200000
300000
400000
500000
600000
The Wave Muscat
Hills
Jebel Sifah
2 Bed Apartment
3 Bed Villa
4 Bed Villa
Todays sale values from:

2 Bed Apt Muscat Hills RO. 135,000
1 Bed Apt The Wave RO. 65,000
2 Bed Apt The Wave RO. 120,000
2 Bed Apt Jebel Sifah RO. 150,000
4 Bed Villa Muscat Hills RO.350,000
4 Bed Villa The Wave RO. 285,000
4 Bed Villa Jebel Sifah RO. 550,000

Above represent starting prices
Rental yields have settled at approximately the
same levels as Muscat Hills although they differ
significantly between the different phases,
representing the steep value increases seen over
the period the development was sold off plan.
Demand remains particularly high for 2 bedroom
apartment units with good views from both a
sale and rental perspective.

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LAND VALUES
Land transaction levels were depressed throughout the period with significantly lower levels of transaction activity
as compared to normal quarters. The regional and domestic disturbances over this period lead to a substantial
decrease in commercial mortgage loan applications as the market adopted a wait and watch policy.
Values as at end Quarter 1 are estimated as:
Area Land Value Per Square meter
(Omani Rials)
Area Land Value Per Square meter
(Omani Rials)
Residential Commercial Residential Commercial
High Low High Low High Low High Low
Muttrah 140 75 280 150 Al Khuwair 275 150 650 300
Muscat Area 140 75 200 150 Al Ghoubra
South
190 140 600 300
CBD 750 600 Al Ghoubra
North
230 150 600 300
MBD 500 450 Bousher 220 65 400 220
Wadi Kabir 160 100 350 180 Al Azaiba
North
300 150 600 350
Wattayah 250 120 750 350 Al Azaiba
South
500 200
Al Amrat 50 5 150 100 Ghala 500 200
Qurum 280 200 600 280 Ghala
Industrial Area
300 150
Shatti Al Qurum
(Al Sarooj)
500 400 650 500 Al Seeb 150 45 350 180
MSQ 350 280 650 400 Al Khoud 150 70 500 200
Madinat Al Ilam 350 280 650 400 Al Hail 160 70 350 150
Qurum
Commercial
Center
850 750 Al Mawaleh 130 70 380 150
Muna Heights 250 150 Al Rusayl 150 45

Prices in Omani Rials per square meter
For further information please contact


PO Box 947 Postal Code 118
T: +968 24 692 151 F: +968 24 692 515
muscat@sav-oman.com

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Muscat Hills Golf & Country Club
Fully furnished Apartment
For Rent RO.1000 pcm

The Wave
5 Bedroom villa with pool
For Rent RO.1,700 pcm

Shati al Qurum
1 Bedroom Furnished Apartment
For Rent RO. 650 pcm

Ghubrah North
7 Bedroom Villa
For Rent RO.1,100 pcm
Qurum Heights
4 bedroom villa with pool .
For Rent RO. 1,500pcm

Medinat Sultan Qaboos
5 Bedroom Villa
For Rent RO.1,600 pcm

Muscat Hills Golf & Country Club
2 Bedroom frontline apartment
For Sale RO. 135,000 stc
Bar al Jissah - Dusk Zone
4 Bedroom villa on cliff top
For Sale RO. 650,000 stc

Muscat Hills Golf & Country Club
4 Bedroom villa with pool
For Sale RO. 350,000 stc

Azaiba 18
th
November Street
Prime retail showrooms
For Rent From RO. 1,600 pcm

Shatti al Qurum
Quality New Build Office space
For Rent RO 8 psm pcm



Ghala Heights
Grade A Office space
For Rent RO. 8 psm pcm

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This property insight has been prepared for general information purposes only. Savills Oman does not warrant the
information herein is accurate in all detail and third parties should not reply upon any content when making decisions of a
financial nature related to the property market.