The popularity of real estate as an asset class is on the rise among Middle East investors and Dubai real estate, in particular, is making a strong comeback after several years in the doldrums, according to several recent surveys looking at the regional real estate market. These investors are also becoming more strategic, with many seeking to rebalance their portfolios, disposing of non-core assets and seeking income-producing products offering stable revenue streams, according to real estate services firm Jones Lang LaSalle (JLS).
The Middle East and north Africa (MENA) real estate market continues to be dominated by private individuals and family groups rather than the large institutional investors that dominate Western markets.
The JLS survey also shows that expected yields are declining and that Dubai is the preferred investment market, with residential the asset class of choice for most Middle East investors. There is also increased interest in hospitality, according to commercial property and real estate services adviser CBRE Middle East.
The number of transactions in Dubai in 2012 was 65% higher than in 2011, and this trend is expected to continue on the back of sustained economic growth. The latest figures from the International Monetary Fund show 4% growth for 2012, with non-oil sector GDP expanding by 3.3%. The non-oil sector is expecting to continue to grow during 2013.
According to JLS, Abu Dhabi remains 18 to 24 months behind Dubai, with an upturn in the real estate sector not expected in 2013. Market rationalisation has also started with two government-backed real estate developers, Sorouh and Aldar, in the throes of a merger. Factors making Dubai real estate more attractive than other MENA markets include a stable political situation, better transparency than other regional markets, the availability of more investment grade real estate and developed infrastructure, the surveys show.
It is anticipated that the Real Estate Protection Law, due to be announced early in 2013, should further solidify the recovery in Dubai’s real estate sector. Indeed, one survey shows that Dubai, alongside Moscow and Miami, will emerge as the strongest global market in 2013.
Lucia Dore is the head of GCC and Middle East at mergermarket, part of The Financial Times Group.