Rays of recovery

Rays of recovery - Abu Dhabi to lead real estate recovery

Sunday, 19 Apr 2009

Arabian Business reported that Abu Dhabi would be the stand out performer in the region’s real estate market in the next 12 months to 24 months.

According to research from US real estate services firm Jones Lang LaSalle, Saudi Arabia and Qatar were rated as the other best hot spots for investors in the MENA region over the coming one to 2 years.

Dubai was seen to be the furthest market from recovery, as the hardest hit by the downturn in the region’s property market. But, in general, the performance of the Middle East’s real estate market would outstrip that of other regions over the next 2 years the research found, with Jones Lang LaSalle believing 2010 would provide a vintage year for investment.

Two hundred investors gave their opinions on the region’s property market over the next one to two years as part of Jones Lang LaSalle’s Second Investor Sentiment Survey, in association with Cityscape Intelligence. Thirty 6% of respondents considered the Middle East would have the world’s best performing markets over the next 12 to 24 months.

Mr Ian Ohan head of MENA investment transactions at Jones Lang LaSalle said that “That investors are returning to investment fundamentals such as focusing on yield is a welcome finding as is the suggestion that there is at last, an end in sight to the current turmoil.”

The report said that vast oil wealth and a balanced growth rate, together with a relative undersupply of housing and other asset classes made Abu Dhabi the most attractive investment environment in the region.

According to a quarter of respondents, Saudi Arabia would be the strongest performing market over the period. The survey found Jeddah and Riyadh offered the most potential, with the market further boosted by Saudi’s economic cities hitting the market towards the end of the year. A massive undersupply of housing, particularly in the middle income sector would continue to drive demand in the kingdom.

Almost twice as many as respondents than last year’s survey suggested Qatar would outperform other markets.

Strong GDP forecasts and enormous per capita wealth made the small Gulf state the most insulated from a protracted global downturn. However, the study said that significant future supply may temper real estate performance.

The report said that a combination of the international financial slowdown and a flood of new supply on the market had hit Dubai’s sector hard. But the emirate may prove to be one of the most lucrative real estate investment opportunities in the region, with steep adjustments in capital and rental values offering fairer values and greater yields to returning investors.

Mr Andrew Charlesworth head of corporate finance advisory at Jones Lang LaSalle MENA said that the rebuilding of investor confidence was critical to encouraging institutional and fund based real estate investment. He said that “We are beginning to see the return of investor interest in discretionary funds that provide sound investment strategies, professional and credible management and proprietary deal flow.”

All markets in the region were in the downturn stage of their cycle with 2009 seeing a further erosion of values in all markets, the study found.