MANAMA: Saudi Arabia is set to become the best performer in the real estate sector in the next two to three years. Overall the real estate markets of the Middle East will outperform all other regions, according to findings from the Investor Sentiment Survey, an in-depth study of real estate professionals market views conducted by Jones Lang LaSalle in association with Cityscape Dubai, the world’s largest real estate conference and exhibition.
The report also reveals that almost half of all respondents believe UAE will offer the best performing real estate market in the Middle East over the next one to two years, with Saudi Arabia to be the next best performer.
Pooling the views of a sample of over 350 developers, sovereign wealth funds and high net worth investors, the survey is the first of its kind conducted in the region. Jones Lang LaSalle is the world’s leading real estate advisory firm and was recently recognized by Euromoney Magazine — Liquid Real Estate awards as UAE Property Advisory Firm of the Year at a prestigious ceremony in London.
Ian Ohan, head of Investment Transactions, MENA at Jones Lang LaSalle, said: “The Gulf Region offers strong relative international value with active buyers in the region generally looking to transact at 8 percent to 8.5 percent yields for prime commercial operating assets and slightly higher for hospitality product. This is consistent with recent market evidence. However, it will likely bow to upward pressure as the cost of debt rises.
“Maturing markets is the key theme here. Asset pricing in the region is increasingly being underpinned by cash flow valuation reflecting a shift from development-led to capital-based real estate markets. We are anticipating greater transaction activity as sellers’ value expectations begin to more closely resemble income valuations as debt markets tighten and speculative exit opportunities decline.”
“Investors are looking for strong capital growth in Abu Dhabi, Saudi Arabia and Qatar, reflecting their robust economic potential and more nascent stages in the real estate cycle. The issue of market transparency is high on the agenda of investors. This is being aggressively addressed through sustained government initiatives including the enacting of international best-practice legislation and the enforcement of strong corporate governance initiatives.”
“This report is not only the first of its kind undertaken in the region, it will provide a critical benchmark as we look to evaluate this vital sector in the coming months and years,” said Blair Hagkull, managing director, Jones Lang LaSalle, MENA.
The 2008 Investor Sentiment Survey was undertaken in the aftermath of the collapse of Lehman Brothers and is thus the most up-to-date and relevant source on investor sentiment in the MENA region.
Key findings of the report include Middle Eastern real estate markets which are expected to significantly outperform all other regions; over 50 percent of the respondents believe the real estate markets in the Middle East will see the strongest performance of any region worldwide over the next 1-2 years; Asia Pacific, driven by India and China, also has a strong outlook with more than 20 percent of respondents believing it will be the best performing region; investors are least positive toward Western European real estate markets, with only 3 percent expecting this to be the strongest performing region and most Middle Eastern investors do not believe the US and European markets will witness a major improvement in performance in the short term.
