Built to inform

Sign up for the daily newsletters

No, Thank you

Experts discuss trends in GCC real estate

While low oil prices remain a challenge for the real estate sector in the GCC, industry insiders are confident that enough opportunities abound to help the market weather headwinds

SPECIAL REPORTS, Sectors, Affordable housing, Cayan Cantara, Cayan group, Danube Properties, GCC real estate, Property market gcc, Real estate UAE, Rizwan sajan, Savills

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.

“In the UAE, most developers are focussed on the luxury segment, but now, more people prefer affordable homes, which has led to a shift in trends,” he says. “Guaranteeing rental returns, waiving Dubai Land Department (DLD) fees, and offering post-handover payment plans are necessary to attract the attention of buyers in the current market, and are being implemented by property developers.”

Sajan has been notably consistent in his optimism about the market, stressing that he prefers to concentrate on opportunities instead of dwelling on challenges and difficulties in the sector. Talking about his expectations for the coming years, for instance, he states that the market, while already looking good in 2017, will only get better until Expo 2020. 

“Since there will be a huge influx of people in the UAE, we can expect the demand to go up. Real estate will remain aptly priced, and acquisitions made this year should reap great profits,” he says.

On what Danube’s priorities are for the rest of the year, Sajan reveals that the company is focussing on the handover of Dreamz and the three Glitz developments, having already awarded the main contracts for Glamz and Starz to Bin Shaffar, and with deep excavation nearly completed for Miraclz, and fencing and oil investigation work ongoing for Resortz.

He says: “We will also be continuing with our one-project-at-a-time strategy, with a clear focus on commencing construction as we announce new projects. 

“We currently have projects worth more than $300m (AED1.1bn) on the drawing board, slated for launch this year. We also plan to open four more branches by the end of 2017, with one based in the UAE and three serving international customers.”

Cayan Group, for its part, is looking to pay more attention to the hospitality market. 

“In 2016, Cayan Group broke into the hospitality sector through Cayan Hospitality, and the development of projects like Cayan Cantara. Hence, we will be embracing hospitality, given that it’s a sector that is emerging effectively and widely,” says Ahmed Alhatti, the group’s chairman.

He notes that with the sector exhibiting rapid growth in the region, the industry should not “underestimate the significance of investing in this area”.

“There will always be some demand in the residential market. However, the trend that we are seeing emerging within the real estate industry is the influence of the hospitality sector,” explains Alhatti, adding: “From the aspiration for serviced apartments to resort-style living, hospitality is changing the game. 

“Hospitality is closely linked with tourism and real estate across the GCC. According to a Colliers report, in the UAE, in 2016, occupancy was recorded at 78%, even though more than 6,000 rooms were added.”

Further underscoring the importance of tourism, Alhatti notes that the industry is a big driver for two of the GCC’s largest economies – Saudi Arabia and the UAE. 

He says: “In Saudi Arabia, tourism is forecast to contribute 9.2% to the total GDP by 2026. Government policies, such as Saudi Vision 2030, which aims to increase religious tourism from eight to 30 million visitors per annum, are an impetus to the growth of the tourism, hospitality, and real estate sectors.”

Wrapping up on a positive note,  Alhatti  describes what Cayan has in store, offering an update on the firm’s projects: “In Riyadh, the CMC tower will be completed by October 2017, and the excavation work on the Samaya project is done, with infrastructure work set to begin soon. The Acacia and Jeddah projects are still in the design concept process. 

“In Dubai, Cayan Cantara has successfully completed enabling works, including excavation, piling, and shorting. At present, work is ongoing at the basement level with the raft foundation completed. The retaining wall is also completed, while slab work on the level two basement is underway.”

Most popular

Awards

Construction industry conversations around digitisation must evolve
The Middle East construction industry’s approach to tech must evolve and focus on how can

Conferences

CW In Focus | Inside the Leaders in KSA Awards 2019 in Riyadh
Meet the winners in all 10 categories and learn more about Vision 2030 in this
CW In Focus | Leaders in Construction Summit UAE 2019
A roundup of Construction Week's annual summit that was held in Dubai this September

Latest Issue

Construction Week - Issue 753
Nov 09, 2019