& The Qatar Housing Market 1st Quarter | 2020 Considerations for the residential sector amid COVID-19 outbreak www.valustrat.com Remarks from Mr. Pawel Banach General Manager ValuStrat Qatar We recognize that these are uncertain and unprecedented times for you and your families, friends, colleagues, businesses and investments. All of us are facing unique challenges and threats in this environment-some of you quite acutely. The current pandemic has also adversely affected the real estate market, as we keenly await some level of stability to return, regressing fundamentals continue to dampen property market prospects. Of course, this crisis extends far beyond real estate market, it has devastating effects for society as a whole. But the fact remains that property-like most sectors-will be affected directly or indirectly. At the time of this publication, it is too soon to predict the extent to which the market will react, given we don’t know how long the crisis will sustain in Qatar or abroad. It is important to remember that there has been some positive signs. ValuStrat analysis of Chinese property market-the first country to be affected by COVID-19-shows that after an initial hard shock, it has bounced back relatively rapidly. In addition, analysis of previous SARS pandemic of early 2000s indicate similar trajectory, where there is cautious optimism that a strong public response to slow the spread of the virus and provision of financial support to affected households and businesses can counter the projected economic fallout to a certain degree. Even during less difficult times our firm specialised in helping clients navigate change and uncertainty. As COVID-19 and the resulting economic consequences continue to evolve, we are closely monitoring the capital markets and speaking with all stakeholders of real estate market. Key findings of what we gathered is reflected in the Q1 2020 Qatar housing report. We will continue to be a sounding board for our clients and other market participants as we collectively assess opportunities as well as challenges in the current environment. We are offering range of product and service solutions across the real estate sector allowing to understand and substantiate proper measurements against possible "russian roulette"in real estate sector. We will continue to serve our clients, to the best of our abilities and with a positive mindset which helps us advise our clients with every challenge they are facing and capitalise on opportunities. Sincerely Yours, .01 Our Team Pawel Banach, MRICS Declan King, MRICS General Managing Director & Manager Group Head - Real Estate Haider Tuaima Anum Hasan Head of Real Market Research Estate Research Manager Anthony Fernando, MRICS Marwen Azri Property Valuation Senior Property Manager Valuer .02 Q1 2020: COVID 19 and Housing Market In this special market update, ValuStrat shares perspectives on existing trends impacting the stakeholders in the residential sector amidst COVID-19 pandemic. Pre COVID 19: 2019 Residential Market Trends The residential sector of Qatar has been grappling with subdued demand, growing supply and deteriorating performance indicators (rents, prices and occupancy) since 2016. However, in 2019 there were two discernible trends: 1) Tenants Trading Up: The correction of rents over the past few years has allowed tenants in Qatar to move to premium apartments within the same community or prime locations. Due to price differentials being much lower than in previous periods tenants were finding more value in cost to change. This was corroborated by an increase in occupied units and a rise in volume of transactions by 72% YoY in The Pearl during 2019. In addition, there was a steeper fall in rents by an average of 8-12% YoY in secondary locations compared to prime locations where rents fell between 5-8% YoY 2) Slowing down decline in prices and rents: As per ValuStrat Price Index (VPI), residential capital values fell on average by 2.4% per quarter from 2017 to 2018. However, during 2019 values fell by 1.3% per quarter. Similarly, residential asking rents fell on average by 3.4% each quarter from 2017-2018 and it fell marginally by 1.5% quarterly in 2019 These trends were expected to continue in 2020 and it was projected the prices and rent might stabilise in some areas of Qatar after a continuously receding trajectory since beginning of 2016 .03 COVID 19: Policy Response from Government of Qatar With the advent of COVID-19 pandemic came an external shock which initially started spreading in December 2019 in China, albeit, migrated to Qatar towards the end of February 2020. The crisis brought upon by COVID-19 pandemic has potentially impacted all aspects of society. Local, regional and national governments are responding to containing the virus by implementing various measures. In Qatar we have seen a swift imposition of policies to restrict the spread of the virus:1: • Suspension of inbound flights except transit and • Public events and gatherings are also prohibited cargo • Changes in healthcare services in Qatar’s • Suspension of public and private schools and healthcare system such as stopping some universities. Adoption of distance learning elective health services except for emergency cases • Lockdown affected streets of Doha Industria Area (Streets No 1-32) • Public health awareness campaigns and intensified food inspections to ensure health • Closure of cinemas, theatres, children's play compliance areas, gyms, money exchange locations, wedding venues, museams and home services • Imposition of work from home for minimum 80% of employees in the private sector. The workplace • Closure of non-essential retail stores and bank timings in both government and private sector branches in commercial complexes and shopping will be six hours from 7 am to 1 pm (excluding centres with the exception of shops, food outlets stores selling food stuff, pharmacies and and pharmacies restaurants that do deliveries) 1 https://www.gco.gov.qa/en/media-centre/press-release/ .04 COVID 19: Policy Response from Government of Qatar The measures introduced are not limited to the ones mentioned above. In addition to this, government of Qatar also announced a QAR 75 billion economic stimulus package for private sector and real estate developers have announced various measures to tackle the economic fallout of the virus: Policy Potentially Benefitting Sectors Time Period (Months) QCB to establish appropriate All 6 mechanism to encourage banks to postpone loan instalments and obligation of the private sector for a grace period Exemption of water and electricity fee Hospitality and Tourism sector, retail 6 sector, Small and Medium industries sector, Commercial complexes in exchange for providing services and exemptions to tenants and logistic areas Qatar Development Bank (QDB) All 6 postpone instalment of all borrowers Exemption from rents for the Small and Medium Industries 6 logistical areas Exempting food and medical goods Healthcare and Food & Beverage 6 from custom duties Industry Qatar Development Bank launched 100% Privately owned companies Loan will cover staff payroll and National Guarantee Program to (Minimum 51% ownership by Qatari rental payments for three month provide guarantees for local banks to partners) except those involved in (April, May and June), however it can grant loans to affected private real estate, construction or be payable for a period of 3 years companies for staff payroll and rental contracting payments Doha Festival City, Barwa Real Retail, Commercial and SMEs 3-6 Estate, Katara, Qatari Diar, United Development Company (UDC), Woqod, Qatar Science & Technology Park (QSTP), Gulf Warehousing Company (GWC), Qatar Foundation, announced exemption of rent for their tenants limited to specific sectors COVID-19 is estimated to impact all sectors of real estate in Qatar directly or indirectly. The restrictions on mobility resulting from policies implemented by authorities, abroad and in Qatar, to contain the spread has directly altered the way people socialise, work, eat, shop and travel. As a result, demand for spaces within real estate industry has notably reduced. It is projected to impact the residential sector indirectly as a result of potential adverse consequences of the pandemic on the economy. At this point in time, it is premature to predict the extent to which the local housing market will respond, as we cannot ascertain how long the crisis may prolong in local and international markets. Nevertheless, we can begin to assess certain trends in the housing market which are becoming evident with the passage of time. .05 • • Source: MinistryofJustice Transactions Residential where anotablefallinMarch2020wasobserved to JanuaryandFebruary,thoughnotinQ12020, volume hasalwayspickedupinMarchcompared As observedinpreviousyears(2016-2019), dipping annuallysinceQ22019. COVID-19 astransactionalvolumeshavebeen cannot befullyattributedtowardstheadventof change comparedtoQ42019.However,thisfall residential housesdecreasedby13%YoYandno Overall, duringQ12020transactionalvolumesof Jan 97 Feb 99 Mar 105 Apr 91 May 144 2016 Jun 136 Jul 55 Aug 91 Sep 101 Oct 214 Nov 210 Transactional Volume Dec 136 of Houses (2016 - 2020)Jan 161 Feb 129 Mar 168 Apr 173 May 146 2017 Jun 57 Jul 90 Aug 184 Sep 100 Oct 154 Nov 188 Dec 108 Jan 78 Feb 145 Mar 170 • • During Q12020,ThePearlandWestBayLagoon Median transactedsizeforresidentialhouseswas Apr 204 was higherby16%YoYcomparedto2019 During thefirsttwomonthsofQ12020,volume a notablefallinvolumeduringMarch2020. decrease