Slow growth in Brunei property market will continue with an oversupply of commercial shophouses and shortage of residential houses in the next few years, real estate agents said.

A lot of locals cannot afford to buy houses because prices of building materials have increased and contractors cannot wait for interested buyers to go through the long process of paying loans, said a real estate agent who did not want to be named.

``It is tough especially when there are a lot of new shophouses coming up, but small and medium enterprises (SMEs) who have no background and experience in business have difficulty getting loans from the banks,'' she told The Brunei Times.

Figures from the Land Department in 2006 showed that rental of commercial properties have gone down by 40 per cent in old and poorly managed areas in the Brunei-Muara district.

She said that it is also difficult for the property market to gain momentum in Brunei because permanent residents and foreigners are not allowed to own properties.

She said that property value has declined, but there has been a modest increase of prices in residential properties, with more foreigners looking for houses while setting up their companies in recent months.

``This increasing number is an indication that more foreigners are now interested in setting up businesses compared to the previous years,'' she added.

She remains positive that Brunei's residential properties will grow, albeit slowly, with a rising demand among the younger generation to buy a house as a priority.

With the Brunei Economic Development Board's methanol project, there will be some slight changes in occupancy rates of houses in the Lumut and Kuala Belait area, she said. However, she said, property prices in that area was very high compared to Bandar because of the developmental project.

She stated that property prices between the Brunei-Muara and Belait district could go up as high as a 50 per cent difference.

Buyers can buy a bungalow for about $250,000 in Kuala Belait, but they can get a double storey detached house for a similar price in the Brunei-Muara district, she said.

A property management lecturer at Sultan Saiful Rijal Technical College said that Brunei needs a proper system whereby the property market is controlled by landlords and tenants.

``Brunei is different from other countries because standard prices (of properties) do not exist, it is up to the buyer to bargain with the seller on the price,'' she said.

She said that ``this is ruining the property market in Brunei'' because sellers face pressure from buyers to lower their prices or it could result in more vacant properties.
The lecturer added that the sultanate should introduce the strata title legislation to allow permanent residents and foreigners to buy at least one unit of a building.

She said this will in turn bring in more foreign investors, but is aware that there will be objections to the implementation of this law.

Another agent from Bruworld Real Estate echoed the same sentiments, saying that the growth of property market is slow because locals cannot afford higher priced houses in general and foreigners could not own properties.

``This is a problem because a lot of foreigners who are interested could not get loans or find a local nominee,'' she said.

Statistics from the Land Department have also indicated that only 4 per cent of the total land in Brunei-Muara are private, while 56 per cent are state owned and forest reserves constitute 36 per cent of the land allocation.

On the other hand, property prices in some Asian economies have risen significantly, with home prices increasing more than 11 per cent in South Korea, while prices in China skyrocketed by more than 20 per cent.

According to property consultants Jones Lang LaSalle, investors are pouring in some $100 billion into Asian real estate, a surge of 40 per cent a year earlier.