Oman’s landlords fear a property crash after about 300,000 foreign workers left the country last year and the government told them not to expect an economic recovery in 2021.
The Ministry of Economy said on Thursday that property owners would have to bear losses for another year as the country recovers from the effects of the pandemic.
“The economy will need time to recover from the devastation of Covid-19 and we asked owners of both the commercial and residential buildings to expect losses in 2021 as their properties would continue to be partially vacant,” the ministry said in a statement reported by Oman Television.
“But this is not their sacrifice alone but a sacrifice for all the businesses in the country, with no exception. We hope 2022 will be the time of the economic recovery.”
Landlords say they are already feeling the squeeze from rapidly falling rental demand, with some reporting a drop of as much as 50 per cent from pre-pandemic levels.
Official statistics show there were about about 1.5 million expatriates working in Oman at the end of November 2020 compared with about 1.8 million at the end of December 2019. Most of the expatriates left Oman between April and November because of the pandemic.
“It has been a tough year for me because of coronavirus. My 14-flat building was full until May this year. Now more than half of my flats are empty and I am forced to lower the rent to almost half of what it was to keep them occupied,” Hafidh Al Futaisi, a landlord in Muscat, said.
Some landlords fear they might not be able to keep up with the bank repayments.
"The rental return I get now from my building cannot pay the bank repayment in full. As a matter of fact, I am now paying back just 40 per cent of my bank loan instalments compared with four months ago. The interest is going up and my liabilities are also going up as well," said Rashid Al Harthy, who owns a six-storey building in Barka, west of Muscat.
The Central Bank of Oman assured consumers last week that interest rates would not go up to offset general business losses during the Covid-19 period.
Landlords welcomed the news, saying a freeze on interest rates would help to cut down their losses.
“It is good news and it is much needed. At least now we don’t need to worry about higher interest rates for a while. I can now concentrate on minimising the bad situation by lowering the rent.
“I am dropping the rent on my flats by half with new contract leases,” said Khalfan Al Essa, a landlord of two buildings in AlKhuwair, an area popular with expatriates.
But property expert Faisal Al Alawi said lower rental returns might force banks to repossess some of buildings if it leaves landlords unable to continue with loan repayments.
“A fixed interest rate would help but it would not solve their problems. Once properties are confiscated by banks, it would have an impact on the economy,” Mr Al Alawi said.
But the lower rent is good news for expatriates still in the country.
“Thank God, my line of profession is not affected by the Covid-19,” said Mohammed Rafeeq, 43, an Indian national who has a shop selling construction materials in Muscat.
“Last month, I negotiated a new lease of my three-bedroom flat and now I am saving about 40 per cent. But unfortunately, many of my friends have been leaving Oman in the past four months because they lost their jobs. It is very sad.”