National stability and improved economic conditions are helping to drive growth in Bahrain’s residential property market, according to latest research from real estate consultancy Cluttons.

According to its Spring 2014 Residential Market Outlook report, improving sentiment has helped to lift confidence levels among investors and developers, who are making a slow, but steady return to the market.

Cluttons said the increased stability and job creation is also helping to drive both demand and rental value growth in the lettings market.

Cluttons reported that average villa rents in areas such as Amwaj Islands have edged upwards to BD1,450 per month from BD 1,400 per month.

“This gradual increase in rents has been caused by a depletion in existing stock at Amwaj Islands, due to its popularity amongst the expatriate community,” the report said.

The report also pointed to rising tenant interest in villas in Saar, with average rents rising by 2.5 percent in Q1 to BD1,000 per month, which leaves them 10.8 percent higher than this time last year, making it the best performing villa submarket over the same period.

Harry Goodson-Wickes, Cluttons head of Bahrain, said: “The gradual increase in rents reflects the rising demand for villas in this submarket from families, who are relocating to take advantage of the relatively stagnant rents as national stability levels strengthen, while at the same time upgrading to what they perceive to be higher quality housing.”

Cluttons’ report said the lettings market is expected to benefit from a broadening tenant base for the rest of 2014.

It said that with landlords remaining on the back foot, it does not anticipate a rental value surge this year.

“With budgets remaining largely stable, landlords are keen to retain tenants while showing greater flexibility with asking rates. This is expected to further dampen the prospect of any sudden uplift in the performance of the lettings market,” the report added.

Improved economic conditions in Bahrain are also supporting a resurgence in the sales market, Cluttons said, adding that developers are now returning to the market as confidence returns among investors, with Saudi and Bahraini buyers among the most active groups.

Goodson-Wickes said: “With recent increased market activity, off plan sales are picking up once more.”