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The real estate market in Oman: 2024 forecast

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As we step into the year 2024, the real estate landscape in Oman continues to evolve, presenting both challenges and opportunities for investors, homeowners, and industry stakeholders.

In this article, we will give you a clear picture of what's happening in Oman's real estate scene for the year ahead.

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How's the Omani economy doing?

Current state

Oman's economy and stability have historically been closely tied to its oil reserves, which have been a significant source of revenue.

This dependence on oil has had a ripple effect on various sectors, including real estate. The Omani government has been working on diversifying the economy, with initiatives like Vision 2040 aiming to reduce oil dependence. These efforts have started to positively impact the real estate sector, contributing to a more stable and diverse economic backdrop.

The real estate market in Oman has seen its ups and downs. In the past, it experienced a boom, particularly when oil prices were high, leading to increased development and investment.

However, it has also faced challenges, including fluctuating oil prices and regional instability. The housing market, a crucial component of the real estate sector, has been growing, with an increasing demand for both residential and commercial properties.

This growth is partly due to a young and growing population, as well as expatriates moving to Oman for work.

Government policies have significantly influenced the housing market. Historically, the government has implemented various initiatives to provide affordable housing to its citizens and encourage home ownership.

These policies have included subsidized loans, land grants, and development projects. More recently, the government has opened up the real estate market to foreign investors, which has been a major shift.

This move aims to attract more investment into the country and stimulate the real estate sector.

Notable events impacting the real estate market include the introduction of new regulations for property buying and selling. For instance, recent changes allow non-GCC (Gulf Cooperation Council) foreigners to own property in integrated tourism complexes (ITCs).

This change has been significant, making it easier for expatriates and international investors to invest in Omani real estate.

When it comes to investment, Oman is increasingly being recognized as a viable option for real estate investment. The country offers a range of properties, from luxury villas to affordable apartments.

Most sought-after areas include Muscat, the capital city, and tourist-friendly regions like Salalah. Properties in these areas are popular due to their modern infrastructure, amenities, and scenic views.

For foreign investors, specific incentives include the potential for residency visas when investing in certain types of properties. However, there are drawbacks, such as restrictions on where foreigners can buy property and the need to navigate a different legal and business environment.

Comparing real estate prices in Oman to neighboring or similar countries, Oman often presents more affordable options than some of its GCC neighbors like the UAE or Qatar.

This affordability, combined with the country's natural beauty and cultural heritage, makes it an attractive option.

The legal framework surrounding real estate investment in Oman is becoming more transparent and stable. The government has been working on reforms to make the market more accessible and regulated.

This includes clearer laws on property ownership, dispute resolution, and investment processes, providing a more secure environment for investors.

Outlook and forecast

Oman's real estate market has unique factors setting it apart from others.

Its strategic location at the crossroads of trade routes between Asia, Africa, and Europe makes it a potential hub for international business. Additionally, Oman's government has been focusing on tourism and infrastructure development, which directly influences real estate demand and value.

Forecasting the country’s economy and stability, based on known factors, leans towards a positive outlook. Oman's Vision 2040, focusing on economic diversification away from oil dependency, is pivotal. The plan emphasizes sectors like tourism, manufacturing, and logistics.

A successful implementation of this vision is likely to lead to economic growth and stability, positively impacting the real estate market.

Cities experiencing the fastest growth include Muscat, due to its status as the capital and economic hub, and Duqm, an area undergoing significant development as an industrial and commercial hub. Salalah, known for its tourism appeal, also shows potential for growth.

Comparing Oman's economic forecast to regional neighbors or competitors, it seems to be on a stable trajectory, especially considering its efforts at economic diversification. While it might not match the rapid growth rates of some Gulf countries, its stable and consistent approach could offer a more sustainable growth model in the long run.

As for anticipated changes in government policies in 2024, there are a few areas to watch.

These include potential modifications in foreign ownership laws in real estate, further encouraging foreign investment. Additionally, there could be new incentives or projects aimed at boosting the tourism sector, indirectly affecting the real estate market by increasing demand for hospitality and residential properties.

Specific facts suggesting improvements in Oman include ongoing infrastructure projects like airport expansions, new roads, and port developments.

These not only improve accessibility but also enhance the attractiveness of real estate investments. Moreover, the increasing interest in Oman as a tourist destination could lead to a higher demand for short-term rental properties and hotels.

However, potential risks should not be overlooked. These include the possibility of fluctuations in oil prices, which still significantly impact the economy. Political instability in the region is another risk factor.

Should these risks materialize, the real estate market could face reduced investor confidence, slower growth, or declining property values.

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What about housing prices in Oman?

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Current state

In Oman, the trend in real estate prices over the past few years has been quite dynamic, influenced by both internal and external factors.

Historically, the real estate market in Oman, like many Gulf countries, has been sensitive to fluctuations in oil prices. During periods of high oil prices and economic booms, there's typically been a surge in real estate prices due to increased investment and development activity.

Conversely, during economic downturns or oil price slumps, the market has often faced challenges, with prices stagnating or even declining.

Looking at the past decade, real estate prices in Oman have experienced varying trends. Around a decade ago, the market was buoyant, driven by high oil prices and strong economic growth. However, following the downturn in oil prices around 2014-2015, and the economic challenges that ensued, there was a noticeable cooling off in the market.

This situation was further impacted by regional geopolitical tensions and the global economic slowdown.

Currently, real estate prices in Oman are showing signs of stabilization, with some areas experiencing gradual growth. This stabilization is partly attributed to the government's efforts in diversifying the economy and improving the business environment, which have begun to positively impact the real estate sector.

When it comes to regional variations within the country, certain areas are experiencing higher growth in real estate prices.

Muscat, the capital, continues to be a prime area due to its status as the economic and administrative center of the country. Additionally, areas like Duqm, which are seeing significant industrial and infrastructural development, are also witnessing an uptick in real estate prices.

The growth in these regions is driven by increased commercial activity, infrastructural improvements, and growing interest from both local and international investors.

The contrast between urban and rural real estate prices in Oman is quite pronounced. Urban areas, especially those in or around major cities like Muscat, Sohar, and Salalah, tend to have higher real estate prices. This is due to better infrastructure, more job opportunities, and higher demand for housing and commercial spaces.

Rural areas, in contrast, have lower real estate prices, reflecting the lower demand and less developed infrastructure.

The specific facts driving these trends include Oman's ongoing economic diversification efforts, which are reducing reliance on oil and opening up new sectors for growth. The government's focus on tourism, manufacturing, and logistics is creating new hubs of economic activity, which in turn boosts real estate demand.

The introduction of policies aimed at attracting foreign investment and expatriates, such as the ability for foreigners to own property in designated areas, is also playing a significant role.

Outlook and forecast

The current state of real estate prices in Oman is being influenced by a combination of economic and demographic factors.

Key among these is the national economic diversification plan, which aims to reduce dependence on oil revenues. This plan includes initiatives to boost sectors like tourism, manufacturing, and logistics, leading to new development projects and increased demand for both commercial and residential real estate.

Demographically, Oman has a relatively young and growing population.

This demographic trend results in a steady demand for new housing, especially in urban and developing areas. Moreover, the expatriate population in Oman, which forms a significant part of the workforce, especially in urban centers, also contributes to the demand for housing.

Looking at factors that could lead to an increase in housing prices in the near future, several specific trends and events are noteworthy.

The continued implementation of Oman's Vision 2040 economic strategy, with its focus on infrastructure development and diversification, is likely to stimulate the real estate sector.

Projects like the development of the Duqm Special Economic Zone and the expansion of tourism facilities in places like Salalah are expected to drive up demand for real estate in these areas.

Another factor is the potential increase in foreign direct investment, especially if the government continues to relax property ownership laws for foreigners. This could lead to a surge in demand for high-end and luxury properties, particularly in tourist-friendly areas and major cities.

However, it won't be the case for all regions. Areas that are directly benefiting from these economic and infrastructural developments are likely to see the most significant increases in housing prices.

More remote or rural areas, which are not the primary focus of these development projects, may not experience the same level of price growth.

Conversely, there are also factors that could lead to a decrease in housing prices in Oman. One significant risk is the volatility of global oil prices. Since Oman's economy is still partially dependent on oil, a significant downturn in oil prices could lead to economic challenges, impacting the real estate market negatively.

Another potential factor is geopolitical instability in the region, which can affect investor confidence and economic stability, leading to a possible decrease in real estate demand and prices.

Additionally, oversupply in certain segments of the real estate market, particularly if development projects outpace demand, could lead to a decrease in prices.

This is more likely to happen in areas where development is being pursued aggressively without corresponding growth in demand.

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How's the demand for the real estate market in Oman?

Current state

The current demand for residential real estate in Oman reflects a dynamic market shaped by various factors.

In recent times, the balance between buyers and sellers has been influenced primarily by economic conditions and government policies.

Regarding the balance of buyers and sellers, it tends to fluctuate. Factors like economic diversification, an increase in foreign direct investment, and government initiatives aimed at boosting the real estate sector have at times created a high demand. In contrast, factors like oil price volatility and regional instability can lead to periods where there are more sellers than buyers.

The supply of new housing in Oman is being actively managed. The government, aware of the need for both affordable and luxury housing, has been encouraging development in these areas.

However, the challenge is ensuring that this supply meets the actual demand in terms of both quantity and type of housing. Oversupply in certain segments, particularly in luxury housing, has been a concern in the past.

Buyers in Oman are looking for a range of properties, but there's a notable trend towards affordable housing and properties in integrated tourism complexes (ITCs). For the expatriate community and foreign investors, ITCs are particularly attractive due to the legal ownership structures in place.

Within the local population, there's a growing demand for affordable, family-friendly housing, reflecting the country’s demographic trends.

Interest rates for mortgages play a significant role in determining the buying power and demand of consumers. While specific rates can vary, they have generally been favorable, making mortgages accessible to a broader segment of the population. Lower interest rates increase buying power, allowing more people to enter the real estate market.

However, any fluctuations in these rates can directly impact demand, as higher rates may deter potential buyers.

Recent government policies and regulations have had a noticeable impact on the real estate market. For example, the government has made it easier for expatriates and foreign investors to own property in Oman, particularly in designated areas like ITCs. This move has the potential to increase demand for real estate, particularly in the luxury segment.

There have also been initiatives to provide affordable housing to the local population, which is crucial in balancing the market and ensuring a steady demand for residential properties.

Outlook and forecast

Demographic shifts in Oman, such as urbanization, are significantly influencing the real estate market.

The country has seen a trend of people moving from rural areas to urban centers in search of better job opportunities and access to amenities. This urbanization drives demand for residential properties in urban areas, particularly in and around major cities like Muscat, Sohar, and Salalah.

Although Oman doesn't have an aging population issue like many Western countries, the youthfulness of its population fuels the demand for new household formations, which in turn boosts the real estate market.

Current trends in household formation in Oman show a preference for smaller, more affordable homes. This is partly due to the economic diversification efforts that have led to a more varied job market, allowing younger people to establish independent households.

Consequently, there is an increased demand for apartments and small to medium-sized villas, especially in urban areas.

In terms of real estate as an investment, there's a growing interest in purchasing properties for rental income and capital appreciation. This trend is fueled by the stable political and economic climate in Oman and the government's initiatives to attract foreign investment. Properties in integrated tourism complexes (ITCs) and urban centers are particularly popular among investors.

These areas offer the potential for higher rental yields and appreciation due to their popularity among expatriates and tourists.

Cultural trends also influence the housing market in Oman. For instance, there is a cultural preference for owning property, which is seen as a symbol of stability and success.

This cultural norm favors the purchase of residential properties, particularly villas and townhouses, which are traditionally preferred for family living.

The trend of buying properties as investments rather than for living purposes is becoming more prevalent. This shift is partly due to the attractive returns on investment that the real estate market offers.

Additionally, the influx of expatriates and tourists has created a demand for rental properties, making real estate investment an appealing option.

Foreign investment plays a significant role in Oman’s real estate market. The government's decision to allow foreigners to own property in designated areas has opened up the market. This policy particularly creates demand for high-end and luxury properties, as foreign investors often look for premium real estate options.

Regarding restrictions and encouragements for foreign investors, while there are certain restrictions on where foreigners can buy property (mostly limited to ITCs and urban areas), the government has been encouraging foreign investment through various initiatives.

These policies generally boost demand, particularly in the luxury and high-end segments of the market.

Finally, niche markets within Oman's real estate sector, such as luxury properties and eco-friendly homes, are experiencing unique trends. The luxury property market is growing, driven by both local and foreign high-net-worth individuals looking for premium living spaces. On the other hand, there's a budding interest in eco-friendly and sustainable homes, although this market is still in its nascent stages compared to more established real estate segments.

This interest in sustainable living is driven by global environmental awareness and the government's emphasis on sustainable development.

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How's the rental market in Oman?

Current state

In Oman, the demand for rental properties has been influenced by various factors, including economic diversification, demographic shifts, and urban development.

The types of rental properties in demand vary significantly based on location, tenant demographics, and economic conditions.

In urban areas, particularly in cities like Muscat, Sohar, and Salalah, there's a high demand for apartments and single-family homes. This demand is driven largely by expatriates who move to Oman for employment opportunities, as well as young professionals and smaller Omani families looking for modern living spaces. These tenants often prioritize location, preferring properties close to business districts, shopping centers, and schools.

Amenities like air conditioning, parking, and security are also highly valued.

In suburban areas, the demand shifts slightly. Here, there is a preference for larger single-family homes or villas, often sought after by larger families who value more space and privacy.

These areas are typically quieter and offer more of a community feel, which is appealing to families with children. Proximity to schools and parks, as well as community amenities like swimming pools and playgrounds, are often key considerations for tenants in these areas.

Rural areas have a different rental market dynamic. The demand in these areas is generally lower compared to urban and suburban regions. The tenants here are often locals who prefer traditional houses and value proximity to extended family and agricultural land over urban amenities.

These properties are typically larger in size and may not have the modern amenities found in urban apartments but offer more land and a connection to the local community and nature.

Demographic characteristics of tenants vary across regions. In urban areas, tenants are often younger, including singles and young couples, many of whom are expatriates or young professionals. In suburban areas, tenants are more likely to be families with children, looking for larger homes with outdoor space.

Rural tenants are often older and have larger family sizes, with a preference for traditional housing.

Income levels and economic factors significantly influence the type of properties tenants are renting. Higher-income tenants, often found in urban areas, tend to rent modern apartments or villas with more amenities.

In contrast, tenants with lower income levels, who are more prevalent in rural areas, often opt for more affordable, traditional housing.

Certain regions in Oman have a high concentration of specific tenant groups. For example, areas close to universities and colleges may have a higher concentration of student tenants, while regions with thriving business districts or industrial hubs attract young professionals.

Some coastal towns, known for their leisure and tourism appeal, might attract retirees or individuals seeking temporary vacation rentals.

Outlook and forecast

The rental market in Oman is primarily influenced by a combination of demographic trends, economic factors, and evolving lifestyles.

Key among these is the influx of expatriates, largely driven by the country’s economic diversification efforts. This influx brings a steady demand for rental properties, particularly in urban areas like Muscat, where there's a concentration of businesses and international companies.

Evolving lifestyles and work patterns, such as the increasing prevalence of remote work, are beginning to influence rental preferences.

Tenants are now looking for properties with extra space that can serve as a home office, high-speed internet connectivity, and in some cases, a quiet environment conducive to work. This trend might lead to a higher demand for rentals in suburban areas or quieter parts of cities, where larger spaces are more affordable and available.

Specific cities or regions in Oman are indeed experiencing significant demographic changes, impacting their rental markets.

For example, Duqm, a growing industrial and commercial hub, is attracting a workforce that requires accommodation, thus boosting the rental market in that region. Similarly, areas like Sohar, with its port and industrial activity, are seeing a growing demand for rental properties.

Emerging urban areas, such as the aforementioned Duqm, are becoming new hotspots for rental properties.

The government's focus on developing these areas into economic hubs is attracting both domestic and international workers, creating a need for more rental housing.

Technological advancements and innovations are also impacting the rental market in Oman. The rise of online real estate platforms has made it easier for tenants to find and compare rental properties, leading to a more dynamic and competitive market.

Landlords are increasingly adopting technology to manage properties and communicate with tenants, enhancing the efficiency of the rental process.

Sustainability and green living are beginning to influence the rental market as well. Although still in the early stages, there’s a growing interest in eco-friendly homes, driven by global environmental awareness and the government's emphasis on sustainable development.

This trend could lead to a niche market for green properties, particularly among environmentally conscious expatriates and younger tenants.

The rental market forecast varies across different regions of Oman. In major urban areas like Muscat, the market is likely to remain robust due to continuous demand from expatriates and professionals. In contrast, in rural areas, the market might be more stable and less dynamic, with demand primarily from local residents.

The long-term outlook for the rental market in Oman, considering all these factors, appears to be positive, particularly in urban and emerging economic hubs. As the country continues to diversify its economy and develop new industries, the demand for rental properties is expected to grow.

This growth, however, may be more pronounced in areas that are directly benefiting from economic development initiatives.

Regarding niche markets, luxury properties in areas like Muscat and integrated tourism complexes are experiencing unique trends. These areas are attracting high-income expatriates and tourists looking for short-term rentals, creating a market for high-end, luxury rental properties.

Similarly, the market for eco-friendly homes, though still niche, is set to grow as more people become conscious of environmental issues and seek sustainable living options.

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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.