By Santhosh V Perumal/Business Reporter

Rents have started rising in Qatar because of expanding population which is creating “strong” demand for residential property, according to DTZ, a global property services company.

Moreover, delays in new stocks reaching the market are creating rental growth, DTZ said in a latest report.

“Robust economic and population growth continues to drive demand for real estate across all asset classes,” it said.

Economic growth is forecast to stabilise at levels of approximately 4.5% a year over the short- to medium-term and inflation, which is also heading up primarily due to rising rents, is expected to remain at sustainable levels of 3.5%-4% over 2013 and into 2014.

Annual population growth over the 12 months to the end of May 2013 equates to 9.35%. If average population growth of 7% per annum is sustained into the future, the population will reach 2.1mn by May 2014 and 3.15mn by 2020.

Highlighting that supply of luxury apartment accommodation is predominantly located within the Diplomatic District and on the Pearl, DTZ said at the end of 2010, the total stock of luxury apartments had reached approximately 8,500 units.

Supply increased by 32% in the 24 months up to the end of 2012 reaching 11,200 units. To date no new apartment developments have opened in 2013 at either the Pearl or in the Diplomatic District, according to the report.

Although there are several towers in both districts, which are scheduled to open and these should increase supply by 4,000 apartments before the end of 2013,  in DTZ’s experience delays are common place and “it is unlikely that all this supply will be delivered within the prescribed time frame”, it said.

Slow growth in supply means that availability of apartments to lease in both the Diplomatic District and the Pearl remains limited, it said, adding vacant apartments are typically larger units with three plus bedrooms, those that suffer from poor location/finishes or that are excessively priced above market levels by the landlord.

The impact of high occupancy rates has been a gradual uplift in the average monthly rental rates, it observed.

Finding that residential sales at the Pearl dominate the freehold market, DTZ said sales activity had improved over the last two years but “remains limited”.

The improved sales activity and greater optimism from potential purchasers/investors is due several factors, including improved finance rates by local banks and that the Pearl has become an established and successful residential location with greater certainty on occupational costs and improving rental returns.

Average prices have stabilised at QR11,000–QR13,000 per sqm. Townhouse residential units and select apartments - which benefit from efficient use of space, superior views, finishes and a high level of onsite amenities - are commanding premium sales rates closer to QR15,000 per sqm, DTZ said.