In 2023, however, it is expected that the GDP will recede to 2.2% due to the drop in oil production and prices and the slowdown in the non-oil sector, as per the Savills Q2 2023 Bahrain Property Market in Minutes update.

Residential Sales Market

The demand for villas exceeded the apartment sector, and the inquiry levels and transactions were concentrated across the mid-range segment. Despite this preference for villas, the capital values have remained at the same level during the second quarter, and rates are estimated at BHD 603 per sq m. However, values on a year-on-year basis have increased by 2.3%.

The average capital values across the high-end villa developments have decreased by 1.2% on a quarterly basis to stand at BHD 600 per sq m. This decrease in average values is attributed to the correction in pricing across villa developments in Al Marsa Floating City.

Apartment values in the low-end segment have remained stable on a quarterly basis whilst the mid-end and high-end segments have decreased marginally. 

Residential Rental Market

The demand for rentals across Bahrain has remained mostly stable in Q2 2023. Whilst rental values haven’t moved much on a quarterly basis, those for low-end and mid-end apartments have decreased by 2% to 6% when compared to Q2 2022. 

As of Q2 2023, the low-end villa rental prices have risen by 10.3%. The figures were BHD 800 per month for low-end villas and BHD 1,088 per month for mid-range villas. Meanwhile, the average monthly rental for high-end villas has stayed steady at BHD 1,294, whilst rates for high-end apartments are anticipated to be BHD 655.

Hashim Kadhem, Head of Professional Services at Savills in Bahrain, said: “Bahrain's residential and commercial property sectors have benefitted from a raft of positive policy measures, including the Economic Recovery Plan, the issuance of the Golden Licence, and the national jobs plan. However, recent estimates suggest that the GDP will likely taper this year due to a drop in oil production and prices and a slowdown in the non-oil sector, which may also impact the property market to some extent, albeit with a lag.”

Office Sales and Rental Market

As a result of the ongoing relocation of corporate occupiers to grade A developments, rental prices have increased by 1.6% Q-o-Q across the high-end segment, at an average value of BHD 6.5 per sq m.

Despite the stability of rents across the mid-end segment on a quarterly basis, they have increased annually by 9.1% at an estimated BHD 6 per sq m. “This annual increase in rents signifies the scarcity of space across the high-quality developments as well as the ongoing demand from corporate occupiers to lease space across such projects,” says Swapnil Pillai, Associate Director – Research, Savills Middle East.

Savills has noticed that the capital values remained stable across the office development compared to Q1 2023.

“There was also a noticeable uptick in demand for LEED-certified office spaces, demand for which is anticipated to see an increase moving forward as companies aim to meet their ESG goals and requirements,” Kadhem added.

Retail Rental Market

Retail rental rates have been under intense downward pressure over the past year, with prices falling by an average of 7% to BHD 10 per sq m against the backdrop of the sector's ongoing recovery from the effects of the COVID-19 pandemic as well as a sizable supply and demand imbalance.

The biggest adjustment has been in malls, where prices are down 11% year over year and average BHD 12 per sq m, down from BHD 14 last year.

Industrial Rental Market

The Bahrain Economic Development Board (EBD) has taken several measures to diversify the economy away from oil, and there has been a significant effort to attract industrial tenants and operators into the Kingdom. This, in return, has provided greater stability to rents in the industrial warehousing sector. The average monthly rent for medium units is currently at BHD 2.8 per sq m, and BHD 2.7 per sq m for large units.

Savills anticipates that the sector will continue to grow in the medium term as greater emphasis is placed on supply chain, food security, and onshore activities.

Read the full research here