The Pearl Qatar is a four-mile luxury housing community located on a man-made island and surrounded by the Persian Gulf. It contains residential towers, beachfront villas and townhouses and is built around a luxury marina and colonnaded designers shops.
It’s one of only three freehold areas and 18 investment zones in Qatar that allows non-Gulf nationals to purchase residences, and yet even with all its considerable charms, most foreign buyers are staying away.
It’s become clear that Qatar and its capital Doha have not become the next Dubai. Despite plans to ramp up luxury construction and infrastructure in the years leading up to hosting the 2022 FIFA World Cup, experts are uncertain it ever will.
MORE:This Dubai Residential Development Will Have Its Own Rainforest
“In reality, foreign investment in Qatar is limited for a number of reasons,” said Mark Proudley, a director at DTZ Qatar, a real estate consultant group. “There are legal restrictions on ownership, lack of legal framework to protect investors, lack of market transparency and high entry costs compared to Dubai.”
The Pearl lost luster with foreign buyers
Things were far more promising when the Pearl first opened for business a decade ago, according to Mr. Proudly. Demand from European expats living in Qatar was initially strong but disappeared after the global economic crisis of 2008. The crisis led banks to increase the deposit requirement on home purchases for expats from 10% of the purchase price to 35%.
He recounted that the Pearl became notorious for lengthy move-in delays of one to two years and for hitting buyers with hidden utility and services charges, further damaging consumer confidence.
Other developments designated for foreign buyers have also proved disappointing or have been delayed. West Bay Lagoon has a minimum entry cost of $2.5 million that has proved prohibitive for most foreign investors. A $6.8 billion residential project in the city of Al Kohr has been delayed, and the 24-mile man-made city, called Lusail, won’t be completed until around 2021.
By the end of 2015, the Pearl had completed 7,665, units and that number is expected to almost double to 14,672 units when the complex is finished sometime between 2019 and 2021. According to Mr. Proudley, out of the 29 apartment towers that have been completed, only 14 sold individual units.
“The majority of the towers remain under the ownership of the original developer and are leased out to expats,” Mr. Proudley said. “The reason for this is partially due to the limited purchaser demand.”
The Pearl Qatar didn’t respond to several attempts by Mansion Global to contact the development team.
Luxury market being fueled by locals
Mr. Proudley said he has learned from several local developers that during the initial phase of sales from 2005 to 2008, sales to locals and expats at the Pearl were split evenly. Since 2011, purchasers have been predominantly Qataris.
“Very few foreigners are buying in Qatar,” said George Azar, the chairman of Gulf Sotheby’s International Realty. “What we have seen is a surge of Qatar nationals buying in non-Qatari areas.”
MORE:‘Qatari Quarter’ Emerges in London’s Posh Mayfair Neighborhood
Qatar has the largest per capita income in the world and the world’s third largest reserves of oil and petroleum, making it less in need of foreign investment than neighboring Dubai. The country has a largely transient worker population and many expats are provided with housing allowances or corporate-owned dwellings.
Mr. Azar agreed that currently they aren’t seeing a big appetite among foreign buyers for the Pearl. But the luxury rental market continues to be strong with local buyers renting out to expats at good yields, between 9% and 11%,” according to Mr. Azar.
Working to attract more foreign buyers
Adrian Camps, the country manager for Chesterton’s Qatar, one of the consulting and real estate firm’s nine offices in the gulf region, said that the “volume of transactions in the market have shrunk” and “the makeup of buyers has changed following the reduction in global oil prices.” Yet Mr. Camps believes that this scenario may again change in the coming years.
In preparing for the World Cup, Qatar has committed to transforming its infrastructure, including a new airport, container port, metro and rail systems, all totaling $200 billion worth of improvements. Qatar is also working hard to increase transparency in its property market, according to Mr. Camps.
However, it’s unclear whether these measures will help.
“For certain factors, we cannot compare these two cities,” Mr. Mr. Azar said about Doha and Dubai. “Dubai is a hub for many nationalities. The city has emerged as a global city and business hub in the Middle East. Foreigners can establish their own businesses in Dubai, where in Doha, it is still in a very early stage.”