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Experts discuss trends in GCC real estate

by Fatima De La Cerna on May 13, 2017

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The Arab Monetary Fund may have announced back in April that it is expecting oil prices to climb this year and next, but stakeholders in the GCC’s real estate industry are not quite as optimistic.

Noting that Bahrain and Qatar “have always been influenced” by the oil sector, Donald Bradley, CEO of Savills Northern Gulf, tells Construction Week that subdued prices have been a shadow over both oil and real estate industries, and will remain so.

“The biggest challenge facing the GCC will continue to be reduced oil revenue and general consolidation activity,” he says, but clarifies that it’s not all doom and gloom in Bahrain and Qatar, as opportunities can be found in both.

Bahrain’s residential market was “broadly stable” in 2016 despite a challenging economic backdrop, Bradley points out, attributing this stability to growth in non-oil sectors, which compensated for the fall in oil-driven demand.

He adds: “The market witnessed its first stalled project auction in the fourth quarter [of 2016], where Savills successfully sold Juffair Views for $9.5m (BHD3.6m).

“In Bahrain, we are expecting to see further efforts to address large-scale stalled projects, which will present new acquisition opportunities to the market.”

The Qatari market, meanwhile, saw its residential rental rates decline by around 10% in 2016, but with Qatar undergoing preparations for the 2022 FIFA World Cup, he believes the country will soon have a platform to showcase and highlight opportunities in its real estate market.

Like its sister states, the UAE saw its real estate sector weather a challenging 2016, with Core Savills’ CEO, David Godchaux, ascribing last year’s market woes not only to low oil prices but also to state austerity measures, global economic headwinds, and a strong dollar.

“We foresee these challenges to continue this year, however the markets [in the region] are more resilient, with better products continuing to face robust demand; albeit, this scenario is amplified in markets that are not heavily dependent on oil revenues,” he says.

He continues that, as a market, the region as a whole has matured in the last 10 years, with the UAE – Dubai, in particular – leading the development front. “Compared to five years ago, it is now easier to identify core residential areas in Dubai, in terms of location and market depth, providing investors with much-needed peace of mind and adding credibility to a mature market,” says Godchaux.

Giving further details on the Dubai market, he compares it with Abu Dhabi, noting that the latter’s office market has seen contracted demand, owing to austerity and optimisation measures. 

“Landlords are becoming increasingly flexible when it comes to addressing optimisation requirements, with few prime office buildings holding on to prices,” he explains, adding: “In Dubai, the office market is seeing a paradigm shift from Grade B buildings to prime stock. Diversified demand is absorbing most ends of the office market, although slowly for Grade B stock, due to a large amount of vacancy.”

Turning his attention to the prime residential markets in both emirates, he says they are behaving differently, with Abu Dhabi seeing “widespread drops” and Dubai “displaying resilience”.

Godchaux points out that while Abu Dhabi’s focus currently lies in addressing the needs of the mid-market segment, Dubai is aiming for more affordable developments.

He elaborates: “In Dubai, more products are becoming available, and more transactions are happening, at the lower end of the market. The gap for affordable housing is being bridged by developers, and friendly payment plans are coming to the fore as developers try to entice demand.”

Among the developers working on the affordable housing segment in Dubai is Danube Properties. Its founder and chairman, Rizwan Sajan, is cognisant of the huge demand in the market for affordable homes, particularly those that promise a good return on investment (ROI) and are built in convenient locations.