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Last Updated:[22-12-2009 00:37:54 EDT] Zoom in Zoom out Back to Tradenews

GCC to Perk Up on Low Realty Cost

tradenews In a recent report by AT Kearney, a leading global management consulting firm stated Dubai's capacity to "rebound fast should not be underestimated, with low real estate prices at offer now”. It further adds that apart from the UAE, the other Gulf Co-operation Council (GCC) members would also be back on track by attracting foreign investors on similar grounds.

Dubai’s strength comes from the over supply of realty units which in turn reduced prices considerably to make them attractive for investors overseas. Many projects regardless of size those which are either put on hold or shelved will likely factor in on supply and demand quotient to give an edge to the failing real estate firms with higher price and profitability in the near future. "As development projects are temporarily or permanently halted, the oversupply will begin to diminish," the report said.

However, the challenge for local developers is to confront the coming consolidation wave, review diversification strategies and manage existing assets wisely. The commercial segment may be the most affected as the available office space will jump from 4mn to 6mn square metres by the end of 2011.

AT Kearney report titled "2010 Real Estate Global Opportunity Index" says Dubai's experience is a cautionary tale for other GCC countries to manage supply in accordance with demand. It also noted that the UAE real estate was cheaper in comparison to its global peers.

In contrast, Abu Dhabi, the UAE’s capital emirate has witnessed increase in tourism and airport traffic, bank lending criteria for residential sales had been relaxed and construction costs were down 30 percent since the end of 2008. Besides, the emirate boasts of $200bn real estate and many high-visibility projects, such as the successful Formula 1 racing event on Yas Island.

A host of luxuries offered by the GCC member states such as, an environment for high style living standards at a lower cost now is likely to attract foreign investors to bet on the future of the region. Nevertheless it is observed that the oil reserves amounting to more than $5 trillion would continue to be central to these economies for many years to come.

Likewise, Saudi Arabia is the largest real estate market in the region with numerous mega projects. Unlike the UAE, Qatar or Bahrain which depends on foreign investors, the Saudi kingdom has its own domestic demands to be fulfilled in its realty domain. It has been forecasted in another study that Saudi Arabia will face a shortage of up to 1mn housing units over the next three years, as residential prices increase nearly seven percent annually.

The GCC real estate is likely to perk up as there are indications of a global recovery ushered in by emerging economies including China and India where reality has started looking up. Millions of new housing units at affordable prices, falling interest rates and job market stability are expected serve as a springboard to a quick rebound for the region.

By Jose Roy

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