Significant Developments Affecting Property Market in Bahrain

The property market in Bahrain is in fine form at the moment and its future prospects have been enhanced by significant mortgage and finance developments this week.  However, leading global monitor Fitch Ratings have warned that the real estate market could actually be over-hyped and wrapped up in a banking bubble that is about to burst and harm the overall booming Bahraini economy.

The significant developments affecting the property market in Bahrain are therefore not all positive – let’s take a closer look…

On the one hand the announcement by the Bank of Bahrain and Kuwait (BBK) this week that they have a whole series of new mortgage and equity finance products for low to middle income Bahraini and non-Bahraini residents is welcome news for a property market that is healthy but difficult to access for some living in Bahrain.

BBK are aware that property in Bahrain is highly in demand by overseas investors and buyers, and that this level of intense demand has helped to increase domestic prices for residential stock of late meaning that it can be harder for both local citizens and non-Bahraini residents living and working in Bahrain to afford to buy their own home.

This realization led to the bank entering into a prolonged period of product development before releasing its new mortgage and equity finance products this week.  Among the products available there is now the ability for individuals to consolidate loans and debts by taking out a home equity loan against accrued equity in an owned property.

Up to 90% mortgages are also now available for residential property in Bahrain thanks to the Bank of Bahrain and Kuwait, and finance products are available for those who wish to buy into the healthy commercial real estate marketplace in Bahrain as well.

Loan periods of up to 25 years are available, interest rates are fair and all in all this can be considered a highly attractive and positive development for the property market in Bahrain as it creates greater affordability for far more people whether they are Bahraini or foreign.

However, Fitch Ratings have warned that this further boosting of the market could actually push the currently booming real estate economy to the brink of bursting as prices soar higher and inflation spirals upwards.  In their recent analysis of the economy in Bahrain, Fitch Ratings herald the healthy economy but warn that it is built in part on a banking industry which has potentially shaky foundations.

According to the Fitch Ratings’ report, while the banking industry is in fine form at the moment, it has to avoid over extending itself in the form of loans to the real estate industry and it needs to stand up to increasing regional competition within the finance industry from the likes of Dubai for example.

It’s not all doom and gloom from Fitch Ratings however – the key point of their report is maintaining a strong banking economy which does not overextend itself through real estate related finance and economic commitments and if the industry heeds the warning, the Bahrain property market could continue its successful course.

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