A new era for real estate dawns in Oman
The importance of the real estate sector in any nation’s economic and social development is no secret. For years, construction has been celebrated as a pivotal economic driver, and in recent decades we have seen developed economies evolve from industrial and service-oriented development to what experts call a finance and real estate-driven economy.
In this new landscape, real estate is not just a place to park your money; it is a dynamic catalyst for the economy itself. This transformation is not just about the earnings of people who work from home. It extends far beyond that. It is about harnessing the accumulated value stored in residential real estate to enhance our lifestyles. This is not limited to retirees; it is a phenomenon that is shaping societies worldwide. Take, for example, the vibrant real estate scene in Turkey (Yüksel, S., & Kavak, 2019). It is a compelling illustration of how the role of real estate has shifted, and this shift might very well be the most important economic lesson of the 21st Century.
Certainly, real estate is the dominant asset class worldwide. Nowhere is this truer than in the Gulf, where it accounts for roughly 60% of total asset value. And within this vast real estate realm, the residential sector stands at the centre. Several factors contribute to this, with demographics leading the charge, followed closely by the rise of remote work and the spending power of multiple generations. Therefore, we must understand the drivers of residential real estate value in any economy.
One of the key drivers of residential real estate value that often takes centre stage is the ability to secure home financing, a truth that holds even in developing countries.International organisations such as the World Bank and countless analysts have underscored the benefits that wellfunctioning mortgage markets bring to economies. These benefits extend beyond economics, as they foster greater transparency in real estate markets, a critical facet of the mortgage financing process (Asabere et al., 2016). Historical evidence corroborates this policy stance. In the United Kingdom, government support for quasi-banks known as Building Societies propelled homeownership from 29% to 45% in just thirteen years between 1951 and 1964. Similarly, in Saudi Arabia, the 2012 mortgage law catalysed the real estate market’s growth in subsequent years (Al Obaid, 2020), displaying a strong positive correlation with job creation (Ajeeb & Lai, 2022).
In China, the development of mortgage financing has been shown not only to promote the local economy, but also to have a positive spatial spillover effect on economic development in other cities. Another highly significant, and even relatively predictable, spillover effect is that land mortgage financing fuels urban economic development partly by boosting investments in fixed assets by local governments (Chen & Liu, 2022).
Of course, the process must be to some extent reciprocal. Favourable macroeconomics does encourage real estate development and investment and the careful management of extensive residential development is also critical for sustained economic success. After all, no one wants to see failed developments or empty properties. However, the overwhelming international evidence emphasises the pivotal role that financing can play in creating a vibrant and successful real estate sector, one that, in turn, supports economic growth and social prosperity.
The economic renaissance in Oman
The growth and development of Oman’s real estate sector cannot be understood without looking at the transformation that Oman’s wider economy has undergone in recent years. The nation faced its fair share of challenges in the past decade due to fluctuations in the hydrocarbon market. However, recent developments tell a promising story. Oman has seen steady growth in its manufacturing sector, surpassing pre-pandemic levels. Natural gas production has surged by a quarter, and agricultural output is up by a sixth since 2017. The country has embraced modernisation with enthusiasm, evident in the tripling of broadband use in just over two years.
Notably, Oman has taken a more flexible approach to foreign direct investment (FDI) and embarked on a journey of privatising government enterprises. These changes signal a warm welcome to investors. In 2021, GDP saw a 3% rise, followed by an impressive 4.3% increase in 2022.
Last Updated on 10 months by News Desk 1
