PROPERTY BUYING GUIDE

This Guide is intended to explain the typical steps involved in buying a property.  The Guide is free to everyone.  After reading it, you should have enough knowledge of how to successfully go through the buying process and to handle your purchase with confidence.

Questions:

• What service can I expect from an estate agent?
• What costs do I need to consider?
• I'm a first time buyer, what's the process involved?
• What should I choose a solicitor?
• What's involved in the Solicitor's role?
• What do I need to arrange at exchange of contracts?

What service can I expect from an estate agent?

The estate agent is paid by the Vendor, so they act for them not the purchaser. He is not obliged to highlight negative aspects of the property to you. The agent will show you suitable property and put any offers to their vendor clients.

What Costs do I need to consider?

There are a number of costs to be taken into account when buying property. Typically these are:

• Solicitor's fees (Including government charges, transfer fees, local authority searches, etc)
• Part payments on municipality charges, service charges
• About 10% deposit
• Property insurance and house contents insurance
• Mortgage (indemnity premium and arrangement fees - usually can be added to mortgage)
• Surveyor's fees
• Removal firm
• Municipality Charges
• Estate Agent Fees
• Services (Any utilities that need to be reconnected,mail redirection)

I'm a first time buyer, what's the process involved?

Roughly these are the steps involved in buying property:

• You find a property
• You get a mortgage and appoint a solicitor
• The Mortgage company will carry out their valuation on the property
• You instruct a surveyor to do a home buyers report or a full survey
• The Vendors Solicitor supplies draft contract, title deeds on the property to your Solicitor or any other proof of ownership.
• Your solicitor arranges for local search and raises any queries with the Vendor's solicitor.
• Once your solicitor is satisfied you can proceed to signing contracts and agreeing a completion date.
• You provide the Vendor with the deposit.
• Signed contract are sent to you from Vendor.
• Contracts are exchanged and you arrange insurance for the property.
• Completion takes place on agreed date.
• Your solicitor pays reminder of purchase price to Vendor's solicitor.
• Vendors solicitor confirms that sale is complete and arrange for keys to be handed over.
• You move in!

Tips for home buyers:

• Keep registering with estate agents.
• Sometimes agents don't get back to you or send details. It can seem like they're not interested and you wonder if they want to sell houses!  This is a misleading preception - they're just busy and someone else might have beaten you to the post.  Estate agents are not obliged to call you when your ideal property comes in. So it pays to call and visit regularly.
• Appoint a solicitor before you find a property.
• This will avoid delay once you've found a property and want to proceed to survey. It also shows the purchaser/estate agent you're serious about buying.
• Find out the history of property you're interested in.
• For example, how long it has been on the market, if any offers have fallen through etc.  This will highlight any possible problems- for example did the purchaser find a problem at survey stage.
• Offers should always be subject to survey.
• Make an initial offer of around 10% less than the purchase price and be prepared to go upwards. You may meet somewhere in the middle. However, in a market where demand is high, properties usually achieve their asking price and you run the risk of loosing it.
  
• Establish solicitor's costs up front. 
• Legal costs can mount up so establish what it could cost best and worst case. That way you can budget.

PROPERTY SELLING GUIDE:

This guide to sellling property aims to set out the main steps that are involved and that are likely to be encoutered when selling your property. Hopefully the information contained within the guide will give you enough understanding and knowledge of the selling process in GCC to approach the transaction  in good confidence.

Questions:

• Where do I start?
• Do I really need an Estate Agent?
• How does an Estate Agent arrive at a realistic valuation?
• I've had several valuations. Which Estate Agent do I choose?
• How much do Estate Agents Charge, and is this negotiable?
• What about choosing a Solicitor? How much do they charge?
• What can I do to increase the value of my property?
• How should I prepare my Property for viewings?
• What's the best way to conduct viewings?
• When I get an offer, should I take my Property off the market?
• How does the sale proceed towards "Exchange of contracts"?
• How long should I give my Estate Agent to sell my Property?
• What can I do to speed up the sale of my Property?
• What if the Buyer reduces their offer at the last minute?
• What if I can't sell,but have a property I want to move to?
• Do I have to pay the Estate Agent if my Property doesn't sell?

Where do I start?

With a number of issues to pursue regarding the sale, the first step is to appoint some professionals to help you. Unless you are prepared to pay for your own advertising and promotional material, this means choosing an Estate Agent to value and market your property for you, and appointing a Solicitor to handle the legal side of the sale. If you are planning to buy another property, you may also wish to speak to a Financial adviser about mortgage options.

Frequently people forget to appoint a Solicitor until a firm offer from a potential buyer is received and suddenly jolts them into action. But there are several things a Solicitor can do to help prepare for a speedier sale. And experience shows that it's a good idea to be ahead of the game, especially if you are buying another property at the same time. This is covered elsewhere in the Guide.

Do I really need an Estate Agent?

This depends on whether you have the expertise, time, patience and resources to do it yourself. However in the majority of cases it would be the best course of action to acquire such expertise. Estate Agents don't charge you a penny unless they sell your property. You only pay for results, and a good Estate Agent will draw in more potential buyers than you would otherwise be likely to attract so it makes sense.

There is also the convenience of having someone else to field calls, to weed out time-wasters, and to act as a go-between in tricky negotiations. An experienced Estate Agent can offer advice and expertise, too, if you  have problems with a chain, say, or receive multiple offers. The Agent will have seen these many times before, and be able to handle things to your best advantage.

Remember: no up-front payment is required with Estate Agents. The Estate Agents fee is normally paid by the seller and the buyer equally or worked into the total price of the property however the arrangement may differ based on the agreement between the concerned parties.

How does an Estate Agent arrive at a realistic valuation?

• An Estate Agent will visit you at your property to have a look around, and carry out what's known in the industry as a Competitive Market Analysis(CMA). This costs nothing, and is based upon a number of criteria:

General market demand from Buyers

• The popularity of your area(shops, schools,transport etc)
• Current asking price of similar properties nearby
• Prices recently achieved for similar properties nearby
• Significant works/improvements carried out to the property.

The CMA will give you an 'estimated market value'. From this, you can decide on the price at which to market your property. Agents do not charge for their valuations.

The Estate Agent will probably ask you a lot of questions. Don't be put off. This is the mark of a professional Agent, who may ask you for your desired moving date, your reason for selling, and so on. Some people are qary about telling the Agent how quickly they want to sell in case it lowers the valuation. But a good Agent will tell you a minimum and maximum price they could achieve.

Be wary of any Agent who just asks you the price you want for your property and agrees. The Agent should be able to demostrate why they think your property could achieve their stated valuation price. They may be able to quote selling prices they have achieved for similar property in the area, or have a Buyer on the books who wants a property much like yours. But ensure this is genuine: a few agents may use this tactic!

• Your gut instincts aside, here are some marks of professionalism that you may want to look out for: Polite, friendly and well-trained staff.

• Bright colour photos of properties in an attractive window display.

• Clear and helpful advice literature.

• High profile in the area.

• Efficient, computerized administration system.

• Comprehensive marketing e.g. newspapers, signboards, leaflets, Internet.

Potential Buyers all over the world can now view details of property for sale simply by hitting a few keys on their home computer. Why wait for details to arrive in the post, when they can have instant access to Estate Agents' filing cabinets from home, 24 hours a day?

How much do Estate Agents charge, and is this negotiable?

An Estate Agent's fee tends to range from 1-3% of the total sale price, and is paid on completion. 'Sole Agency' deals (where you only instruct one Estate Agent) tend to be significantly cheaper than 'Multi-Agency' deals. When there is a shortage of property on the market, you will find Agents offering to match or beat a competitor's fee, and cut-price offers appear in the property newspapers. You may be able to negotiate a favourable deal. In steadier times, most agents charge around 2%, but the service they offer is likely to vary considerably.

A higher fee is worth paying if the Agent has the experience and ability to get you the maximum price within a reasonable time. For example, let's say an Agent charges a fee of 1.5% to sell your flat. If he achieves a final selling price of AED 100,000, the fee will be AED 1500. Now, suppose another Agent charges a fee of 2%. If he finds a buyer prepared to pay AED 105,000 for your flat, the fee will be AED 2100. But you will still be AED 4400 better off than taking the "cheaper" option. Choosing the cheaper Agent is a mistake if they don't get results. An Agent who has to carry the cost of well-maintained premises, experienced staff, efficient computer systems, and professional advertising is truly earning their fee. And it's worth saying again: "No Sale - No Fee". A bonus to the seller.

What about choosing a Solicitor? How much do they charge?

It may be that you already have a Solicitor who can handle your sale. If not, ask your Estate Agent, friends and neighbours if they can recommend one. If you happen to choose a Solicitor who is recommended by your Estate Agent, communication between them will probably be very good. The Solicitor and Agent are likely to be in regular contact on a number of sales, so they won't waste time chasing one another.

The Solicitor should be a specialist in residential conveyancing for a basic conveyancing service but - as with Estate Agents - it may not be a good idea simply to go for the cheapest deal. Solicitor's costs can mount up, so make sure their charging structure is clear at the outset.

Ask what sort of service you can expect: will a Solicitor handle your sale, or will it be a less experienced legal clerk? Does the Solicitor have reliable systems for obtaining information speedily from local authorities and financial institutions?
When you come close to "exchanging contracts" on a property (the legally binding part of the sale process), speed is often of the essence, particularly if you are also in the process of buying another property. The last thing you want is to be held up by an inefficient Solicitor.

Fast-track Solicitors start the ball rolling as soon as they are instructed, so that a draft Contract of Sale can be drawn up and sent to the Buyer almost as soon as their offer is received. They will also ask you to complete a "Vendor's Questionnaire", to provide information for your Buyer's Solicitor, which should reduce the number of queries and replies that have to be faxed back and forth between the two sides. 

What can I do to increase the value of my Property?

In General Estate Agents will advise against major home improvements. This is because you rarely recoup the cost of your investment, and the Buyer may change it anyway. However, there are a number of simple low cost techniques that can help enhance interest in your property:

• Give the front door a coat of paint

• Fill in and redecorate any cracks to walls and ceilings

• Put a lock on any rear gate

• Spring clean throughout the property

• Weed and clean up the garden

• Maximize a feeling of space - get rid of clutter

• Decorating may not be necessary - discuss with your Estate Agent.

• Make sure the shower works and is free from mould
  

How should I prepare my Property for viewings?

First impressions do count, and the following tips should help viewers to appreciate your property at its best. Although you may be at work when viewers are brought round, try to do whatever you can:

• Tidy up

• Air the rooms

• Hide clutter

• Vacuum clean and dust the main rooms.

• Give the bathroom sinks and baths a wipe over.

• Have some flowers in the main room.

• Fully draw back the curtains to get maximum daylight in the rooms.

• Turn the television and radio off (light music is fine).

• Close all windows that are affected by background noise (traffic, cars etc).

• Banish off-putting smells with, say, the aroma of brewing coffee.

• Try not to let pets and children interrupt the viewing; keep them occupied.

Bear in mind that potential buyers can sometimes be a bit later than the viewing time arranged. With this in mind, when a viewing is arranged (and you want to be there), be clear about the window of time they have if you mean to go out afterwards. This will also help discourage lateness.

What's the best way to conduct viewings? 

There are no hard-and-fast rules here, but do:

• Agree with your Estate Agent who will conduct the viewing.

• Ensure you have all keys readily available

• Give time for viewers to discuss the property alone before they leave.

• Resist the temptation to badger viewers for a decision or opinion during the viewing

• A good Agent will call you with feedback after every viewing. 
  

When I get an offer, should I take my property off the market?

Your Estate Agent will probably advise you against this, just in case the sale falls through. Even if everything seems to be in order, it's possible that after the survey, say, the buyer may want to negotiate on price and you cannot reach a deal. On the other hand, if you leave your property on the market, your Buyer may naturally feel somewhat aggrieved, since they may fear they could be "gazumped" by a higher offer. Whether or not you wish to pursue any additional offers is your decision. To do so might risk discouraging your Buyer, who may pull out of the Sale and start looking at other property as a result. If the latter is not convinced by your assurances that you will not accept other offers so long as the Sale is proceeding smoothly, you could also consider making a verbal or written undertaking to take your property off the market for an agreed period of, say, 7-28 days, whilst surveys and mortgage finance are arranged by the purchaser. 

How does the Sale proceed towards 'Exchange of contracts'?

In general, the sale process goes something like this:
Your Solicitor prepares the contract of sale. For this, you will need to have certain documents to hand. Please note that obtaining these often causes delays, so it is in the interests of the Vendor to chase them as soon as the property goes on the market. If your property is freehold, you will require:
* Title documents or any other proof of ownership
* Paid utility bills.
* Guarantees and warranties
* If your property is leasehold the documents will be as above, except:
* Leasehold title deeds will replace title documents.
* A history of service charge payments.
* A history of municipality charges.
Next, the draft Contract of Sale and a copy of any other proof of ownership (if the property is leasehold it will include a copy of the lease) will be forwarded to the Buyer's Solicitor. The Buyer's Solicitor will check the small-print of the contract, title deeds, service charges, and so on. This checking process may involve many specific queries. A good Vendor's Solicitor will deal with many of these in advance, by asking you to complete a 'Vendor's Questionnaire', which may cover:

• Restrictions/boundaries.

• Owner's understanding of rights of access.

• Any disputes over the above.

• Guarantees/insurance policies.

• Utility services at property.

• Planning.

• Lists of fixtures and fittings.

• Exchange of contracts:

After settling any queries, the Buyer's Solicitor will also need to obtain a satisfactory local search, and a copy of a mortgage offer. Once satisfied, the contract will be signed and a cheque for the deposit sent by the Buyer to the Vendor's Solicitors. Exchange of contracts can then take place. Exchange means that the transaction is legally binding.
At this point in the procedure, it is important that the Buyer arranges building insurance cover for the property, as technically the property comes under the Buyer's ownership.
Completion:
The final stage of the sale is normally set 2-4 weeks from the date of Exchange. On Completion, the Buyer's Solicitor hands over the remainder of the purchase money to your Solicitor. From this, your Solicitor will pay off the Building Society or Bank (if there has been a mortgage on the property), as well as deducting their legal fees, and whatever fee you have agreed with your Estate Agent.
And there you go. It's (sometimes!) as easy as that. 

How long should I give my Estate Agent to sell my property?

You should allow an Agent 6-8 weeks to get a secure offer. After this, it usually takes about 4-8 weeks for an Exchange of contracts, and a further 2-4 weeks for Completion. Be aware that time-scales do vary with market conditions. 

What can I do to speed up the sale of my property? 

• You can't always guarantee that other parties in the sale won't delay you. On your part, however, you can speed things up by doing as much of the work in advance of the Sale as possible.

• Choose a "fast-track" Solicitor who will obtain and hold the Title Deeds in readiness to prepare a draft Contract of Sale, and to apply for a Local Authority Search

• Allow the Estate Agent reasonable access to the property to show potential Buyers round. If possible, let them have keys to show the property when you are out.

• Be flexible about last-minute viewings. 
  

What if the Buyer reduces their offer at the last minute?

As the time to Exchange Contracts approaches, your Buyer may think you can be pushed into accepting a reduced offer (rather than lose the sale, and having to go all the way back to Stage One). It's important not to panic, get furious and call the Buyer yourself. Instead, agree on a course of action with your Solicitor and/or Estate Agent to show the Buyer that you'll not bow to such tactics.
In the first instance, for example, your Solicitor may wish to contact the Buyer to reassert your position, demanding whether they are serious about proceeding with the purchase, and asking for any serious reason to be put in writing. It may be that, when the Buyer's bluff is called, they will soon back down. The success of this tactic does depend on whether either party can afford to delay the Sale. If the Buyer sticks to their guns, you will have to weigh up whether it is worth finding another Buyer. Carefully discuss the options with your Solicitor and Estate Agent. You may be able to reach a compromise with the Buyer.
Sometimes a Buyer may reduce their offer after the survey, or after their mortgage valuation survey. You will have to negotiate through this, again taking the advice of your Solicitor and Estate Agent. It is unfortunately quite common for the Buyer's mortgage company to err on the side of caution, and value the property at up to 15% below the Estate Agent's valuation. Sometimes buyers may proceed despite this by making up the difference from their own funds. If this is not possible others in the selling chain may be prepared to make up the difference - your Estate Agent and/or Solicitor will advise if appropriate, and carry out negotiations.

What if I can't sell, but have a property I want to move to? 

 It's unlikely that going ahead with buying the other property will be a viable option, unless you have sufficient spare capital to do so. But you do have the option of letting your property (on a short let for, say, 3 months) whilst marketing it for sale. Rents for short lets can be high - so you could cover your mortgage and have a bit left over to help with other expenses. If your Estate Agent does not offer a short let service, find one who does.

Do I have to pay the Estate Agent if my Property doesn't sell? 

You won't have to pay the Estate Agent any fee. However you may have to pay your Solicitor's legal costs incurred to date, although some Solicitors, particularly those operating a 'fast-track' service, may operate a 'no sale, no legal fees' scheme and it is worthwhile speaking to your Estate Agent about this before instructing a Solicitor.

RENTING GUIDE:

Finding the perfect apartment or villa can at first appear quite a daunting task. The ability to determine your needs and what you require will narrow down your search considerably.  You need to identify problem areas and asking the right questions will help you make the right choice before you sign the lease. Remember, once you have signed on the dotted line you are typically committed for the duration of the contract.

DETERMINE YOUR NEEDS

Price Range:

Price is one the most important considerations. Decide how much you can afford or want to spend. Remember to factor in utility costs, municipality charges, parking and your usual monthly bills. Knowing your price range from the outset will focus your search, saving you time. In Dubai prices vary considerably, depending on if it is furnished or unfurnished, and most importantly location. Expect to pay more for fashionable areas.

Location:

It is important that the neighborhood you choose to live in is well suited to you and your family. Consider the distance from your work place or schools. Do you mind a long commute every day? Traffic during peed times ca become very slow moving, and should therefore be a consideration when renting. The different regions often have a unique feel and look to them, which may play a large role in your choice of where to live in the City. The proximity of amenities such as grocery stores, Hospitals, shopping malls and the beach should also be considered.

Type of apartment:

Consider the size of your family and the space you require for your furniture and other possessions. Will you be happy in 500 square feet or will you need 1000? Will a one-room bachelor be adequate or do you require a one, two or three bedroom apartment? Typically, the larger the apartment the higher the rent will be.

Features and amenities:

Determine what features you need or desire in your future home. Is an en suite or on-site laundry facility important or do you mind going to the dry cleaners? Does the building feature security features such as security patrols, video cameras or  a controlled-access public entry? Do you want the convenience of a dishwasher, an on-site gym or pool, a balcony etc?

Inspect the apartment:

Never rent an apartment sight-unseen. It is essential that you tour the apartment and examine it closely for problems. Areas that warrant inspection include:

The Building:

What is the state of repair outside and inside? Are common areas kept clean and in good repair? Are the walls in need of  pain? If maintenance appears to be lacking it could be a sign of poor building management.

 

The apartment:

Upon entering the apartment take note of general appearance and upkeep. Are the carpets or flooring worn? Are the walls cracked or in need of paint? Is there staining on the roof or walls (an indication of a water leak). Check all light switches and outlets to ensure they are working. Poor general maintenance may also be an indication of poor maintenance in other areas.

 

Doors and windows:

Are there secure locks, a peephole and deadbolts on all outside doors? Check for gaps around windows, doors, light switches and electric outlets.

 

The kitchen:

Check faucets for water pressure and hot water. Examine the base of the faucet for leaks and look under the sink for signs of water damage. Turn on the stove and oven and check that the refrigerator, dishwasher and any other appliances are in good working order.

 

The bathroom:

Check faucets for water pressure and hot water. Examine the base of the faucet for leaks and look under the sink and around the tub or shower stall for signs of water damage. Press gently on tile. If the tile moves, it could be a sign of water damage in the wall behind the tile. Flush the toilet to ensure it drains properly.

Questions to ask before you sign the lease

• If you  have found an apartment that fits your needs you should ask the landlord about important details regarding conditions of the lease and building regulations. Remember, the lease is for your protection too. Ensure that any verbal promises are also included in the leases. Get it in writing.

• How long is the lease? (Typically one year, although shorter periods including month to month are available)

• Can I sublet the apartment if my circumstances change before the lease period is over?

• How much do you require for a deposit?

• Can I have roommates?

• Are any utilities included in the cost of rent? What about parking?

• Is there special building rules regarding quiet times, pets etc.?

• What is the procedure for obtaining repairs to the apartment? Is emergency maintenance available 24 hours a day?

• What maintenance (if any) am I responsible for?

• What changes can I make to the apartment(paint, wallpaper, carpeting, pictures or shelves that attach to the wall)?

• When is the apartment available?

• When can I move in?
  

Rents: Can landlord and tenant freely agree rents in Bahrain?

Rent and rent increases can be freely agreed.

Deposits

Rent is usually paid monthly, quarterly, bi-annually or annually depending on the terms agreed at the start of the tenancy. The rent is payable in advance, customarily three months in advance, and always quoted in Bahraini dinars (BHD) monthly amount.

What rights do landlords and tenants have in Bahrain, especially as to duration of contract, and eviction?

The tenancy period can either be:

• A short term agreement (less than a year), or
• A long term (more than a year).

In the case of a fixed term contract (a long term contract is more common), both tenant and landlord have the right to terminate the agreement by serving notice three months prior to the end of the lease period.

If a tenant continues to enjoy the property after the expiry of the term, without objection from the landlord, the agreement is considered officially renewed for an indefinite period, under article 511 of the Civil Code. But such a renewal does not take place if the landlord has served a three months eviction notice prior to expiry of the term, even if the tenant continues to occupy the property.

The lease or tenancy agreement must include the name and address of the landlord and tenant, address of the rented property, term of tenancy, monthly rent, payment arrangements, and the responsibilities of the contracting parties during the tenancy.

How effective is the Bahraini legal system?

The usual time period to obtain a final judgment is quite lengthy. There may be numerous appeals by either party, which will normally be heard by a Civil Court. Matters accepted as urgent can take considerably less time, and are heard before a Summary Court.

The following is what happens if the landlord files a suit against a tenant for non-payment of rent, and the tenant subsequently decides to make payment:

• A registered notice letter is sent to the creditor (landlord in this case), stating the amount paid, and the address of the place where the payment was made.
• The creditor, within three days of receiving the notice, has the right to reject the notice and thereby reject the payment. The reason why a creditor would want to reject the payment is to evict the tenant and to dash any possibility of a future relationship.
• If the creditor, within 10 days of receiving the notice, does not reply, then it would have been deemed to be a rejection.
• Refusal of payment entitles the debtor to deposit the money in the Court’s Treasury, and request the lift of any orders, until a final judgment is made.

Brief History: Recent changes in Bahraini landlord and tenant law

Bahraini Land Law has not undergone many radical changes. There is tremendous trust in the Civil Code.

Subsequent legislation in 1953 expanded topics such as formalities of a lease agreement, exceptional circumstances for eviction, and rules on notices.

There have been few alterations in landlord and tenant law, in contrast to the dramatic recent changes in land ownership laws. Major change in the area of Landlord and Tenant law is unlikely.

Property prices still surging in Bahrain

As in the rest of the region, Bahrain’s property prices are skyrocketing.

Property prices in Manama, the capital, have surged 600% over the past three years. In other parts of Bahrain, prices have climbed about 400%, according to developers.

In Juffair, a prime south Manama residential district, the average selling price of an apartment is now around BHD830 (US$2,202) per sq. m., up 66% from BHD500 (US$1,326) two years earlier.

Higher oil revenues and foreign investments have pushed up Bahrainis’ purchasing power, stimulating housing demand. Liberal real estate laws, freedom from tax, and easy home financing have added to the real estate boom.

Land prices have followed apartment prices up, soaring by around 120% annually since 2003. In June 2008, the average selling price of residential land was BHD402 (US$1,066) per sq. m., according to Al Mazaya Holding Co.

On the supply side, the shortage of construction materials here as elsewhere in the Gulf, has intensified the escalation of property prices.

In 2007 total property transactions rose 56% y-o-y to BHD1.37 (US$3.62) billion. Bahrainis accounted for 93% of the total, non-Bahrainis for the remaining 7%.

Property prices surge

Manama’s property prices are the highest in Bahrain. In Seef and Sanabis, on Manama’s northern coast, the average selling price of a freehold apartment is BHD1,050 (US$2,785) per sq. m. In Seef’s Avare Tower, a 75 sq. m. one-bedroom apartment costs BHD85,000 (US$225,458); 120% up from BHD38,000 (US$100,793) in 2005.

Similarly, the price of a 120 sq. m. two-bedroom apartment in Abraj Al-Lulu, another Seef freehold property development, has risen 88% over 3 years to BHD150,000 (US$397,868), according to Tameer Research.

Other Bahrain prices:

• In Juffair, Manama, a freehold one-bedroom apartment sells for around BHD75,000 (US$198,934). A penthouse in the same region sells for BHD325,000 (US$862,046).
• In Muharraq Island, north of Manama, a one-bedroom apartment sells for BHD60,000 (US$159,147).
• In Saar, west of Manama, a resale five-bedroom villa costs BHD173,425 (US$460,000).
• At the Durrat Al Bahrain’s man-made Atoll Islands, on the southern coast, a modern villa sells for BHD490,000 (US$1,300,000).
• In other huge property developments such as Amwaj Island (northern coast), Marina West and Al Areen Resort (both in the western coast), prices of one-bedroom apartments range from BHD50,000 (US$132,623) to BHD330,000 (US$875,309), according to Tameer.

Manama’s land prices have also risen dramatically. Land prices in Sanabis have risen 300% over the past 3 years to BHD40 (US$106) per sq. ft. Similarly land prices in Seef have climbed 400% to an average of BHD275 (US$729) per sq. ft.

Mortgage interest rates low

In the first half of 2008, CBB repeatedly cut key interest rates to maintain exchange rate stability (the Bahrain dinar is pegged to the US dollar at 1BHD = 2.65US$).

Mortgage rates, however, have fallen less than other interest rates. In Q2 2008, mortgage interest rates stood at 8.42%, slightly down from 8.51% a year earlier.

The mortgage market is growing rapidly, albeit from a low base. In Q1 2008, outstanding mortgage loans had grown 72% y-o-y, to BHD452 (US$1,198) million. At the end of 2007, total outstanding credits were around 5.1% of GDP, up from 3.9% of GDP a year earlier.

To cap the banking sector’s exposure, the Central Bank of Bahrain (CBB) stepped in at end-2007 to limit the value of banks’ real estate financing to 25% of loan portfolio value.

To make housing more available, in May 2008 the CBB raised the loan to value limit for residential mortgages from 70% to 90% of the total property value.

Acute housing shortage

Bahrain has plentiful luxury residential properties, but a severe shortage of housing for low to middle-income groups.

There are currently around 55,000 to 40,000 families registered with the Ministry of Works and Housing as having applied for either low-cost housing loans or state-provided accommodations.

In addition, the rising number of expatriate workers has pushed up demand. Only half of the kingdom’s 1 million population were non-Bahrainis in 2007, according to Central Informatics Organisation.

In 2001, there were 105,686 housing units in Bahrain, according to the latest population and housing census. Of this, 32,538 were in Manama.

Rental market tight

The rental market is almost entirely foreign-driven, propelled by Bahrain’s rising expatriate workforce. In addition, many expats working in the Eastern Province of Saudi Arabia prefer to reside in the more liberal Bahrain.

The presence of the American Navy also boosts the rental market. In Juffair, luxurious apartments cater to American soldiers and other wealthy foreigners.

Rents have moved up swiftly. Despite an official ceiling on rent increases of 10% a year, landlords sometimes raise rentals by up to 40% annually.

The average rent for a three-bedroom apartment in Manama was BHD781 (US2,072) per month in 2008, up 11.3% from BHD702 (US$1,862) per month in 2007, according to the UN International Civil Service Commission.

Seef has the highest luxury rental rates. A two-bedroom apartment in Seef rents for around BHD1,000 (US$2,652). Rents for similar apartments in other areas range from BHD650 (US$1,724) to BHD800 (US$2,122), according to Tameer Research.

Construction boom, cement shortage

The construction boom continues. Real estate projects in Bahrain worth BHD3 (US$9) billion are currently under development.

The government actually wants to accelerate the pace of construction to ease the housing crisis, and plans 15,000 new housing units between 2007 and 2010, and more funds for housing loans.

Due to the Gulf-wide construction boom, the prices of building materials have skyrocketed. The cost of materials rose 30% in 2007, and a further 50% in the first half of 2008, according to Al Mazaya Holding Co.

Bahrain is experiencing a cement shortage, as Saudi Arabia has reduced its cement exports to the country from 50,000 tons per week to 25,000 tons per week.

The cost pressures and the cement shortage cooled construction in 2007, with only 9,830 construction permits issued, 7% down on a year earlier.

“The construction sector is losing around 3 to 4 million dinars a day as workers on-site remain idle. Projects are being severely delayed and construction costs are dramatically increasing,” says Samir Nass, chairman of Bahrain Chamber of Commerce and Industry's contractors committee.

Alternative cement suppliers from Spain, Turkey and UAE are expected to step in. In addition, the launch of a Bahraini cement company worth around BHD0.75 (US$2) billion is planned by Gulf Finance House.

Mega real estate projects

Despite all this, the demand for housing is expected to increase, as Bahrain becomes more accessible to other Gulf countries, with the completion of the King Fahd Causeway, which connects Bahrain to Saudi Arabia, and the soon-to-be-built Bahrain-Qatar Friendship Causeway.

Major development projects: