Qatar: 2022 FIFA World Cup infra cutbacks likely
The oil price slump continues to impact on government spending, with cuts to Qatar's FIFA infrastructure projects possibly next in the firing line
Qatar’s government is likely to cut back on the country’s Fifa World Cup 2022 infrastructure as a result of last year’s oil price slump.
According to the property broker CBRE, this could also result in pushing down rents and leaving offices standing empty in Doha over the next few years.
Demand across all property sectors is likely to reduce this year, while the Qatari budget slides into deficit for the first time in 15 years.
Hydrocarbon revenue accounts for close to 40% of the national accounts, despite Qatar’s small population and greater dependence on long-term gas contracts, which leaves it less exposed to oil price slides than other Gulf countries.
This scenario has led the government to reduce its 2016 budget by around 8% compared to the previous fiscal year and implement a series of spending cuts.
Matthew Green, the head of research at CBRE’s Dubai office said: “Given the prolonged nature of the current oil price slump, we can expect to see a sustained period of restructuring within the country, with a spotlight likely to be firmlyplaced upon the 2022 World Cup and its related developments," he suggested.
He added that although streamlining the event facilities has already been introduced, “it appears that this process will be continued as additional cost-saving measures are sought amid widespread spending cuts,” he said.
The anticipation of hosting the World Cup in 2022 has had developers in Qatar feverishly building for the past few years, encouraged by a prosperous economy and rising rents in office space.
CBRE calculates that for office space alone over the next 24 months, 1,700,000 sqm is due to come on to the market – around 32% of the current 5, 300,000 sqm of total office stock.
“Softening of office rentals and rising vacancy rates are seen to be an inevitable outcome of the combined effects of robust supply growth and weaker demand levels," Green added.
“The multiplier effect of potential job losses or a reduction in investment plans would likely be sizeable given the large share of oil-related revenue within the country’s national accounts, and as the major fund sources for auxiliary companies,” he continued.
This will likely result in a contraction in real estate demand across all property sectors, with “a varying degree of severity” he said.
Nevertheless, housing rents in Doha continued to increase, rising 7% last year – although this compared with a 14% annual increase in 2014.
JLL this year cautioned that governments across the region were likely to cut spending.
“While we remain positive on the long-term outlook for real estate markets across the region, there is little doubt that the rebalancing of the fiscal position will result in headwinds and challenges over the next 12 months," said Craig Plumb, the head of research at JLL’s Dubai office.
“While governments continue to spend on development and infrastructure projects, the level of this spending will inevitably be curtailed over the medium term as spending needs are realigned with the reality of lower oil revenue."