DOHA: The 2013 third quarter update of Qatar Central Bank’s (QCB) real estate price index underlines Qatar’s real estate market is on the path of recovery. After reporting a drop for two successive months, the index rose to a new high of 178.6 points in September 2013.
The index, that tracks the price movement of the country’s real estate market, reached a peak in 2013 April and May months with 183.9 points and 190.4 points respectively before dropping to 178.8 points in June. The index further slipped to 174.3 points in July and rose marginally in August reaching 176.9 percent. According to the Ministry of Justice the value of real estate transactions (between July 29 and August 25) was QR1.46bn.
The ratings agency Standard & Poor’s recently noted that Qatar’s real estate market is expected to recover from its sharp decline since 2009. According to S&P, the commercial sector remained more vulnerable than the housing segment. Given its high concentration in lending to cyclical sectors like real estate and construction, this is one of the main risks faced by Qatari banking sector, S&P noted.
The S&P, in its ‘banking industry country risk assessment report released in July noted that despite high stability and strong profitability, severe exposure to real estate sector and aggressive expansion plans are key “weaknesses” of Qatar’s banking sector.
Qatar’s lending and underwriting standards as “aggressive”. Concentration in the real estate and constructions sector is high at 20 percent of total loans at year-end 2012. In addition, foreign currency lending has recently increased dramatically and accounted for 51 percent of total loans at year-end 2012, it noted.
However, leading Qatar-based banks, which according to S&P are exposed to the reported ‘real estate exposures’ said they are strictly adhering to the guidelines laid out by Qatar Central Bank.