Abu Dhabi set to recover first from the global property downturn

The property market in Abu Dhabi could be the first place in the Gulf region to recover from the global downturn, according to research from international property consultants.

Saudi Arabia is expected to be the strongest performing real estate market over the next two years and Qatar is also predicted to do better than places like Dubai, says the study from Jones Lang LaSalle.

Dubai, which led the region's property boom, is regarded as the furthest market from recovery and also the sector that has been hardest hit by the real estate crisis.

In general, analysts believe that the performance of the Middle East's real estate sector will outstrip that of other regions over the next two years. They predict that 2010 could provide a vintage year for investment as markets begin to recover.

The analysis is based on a survey of 200 investors who gave their opinions on the region's property market over the next one to two years as part of Jones Lang LaSalle's Second Investor Sentiment Survey, in association with Cityscape Intelligence.

Some 36% of respondents considered the Middle East would have the world's best performing markets over the next 12 to 24 months.

Andrew Charlesworth, head of corporate finance advisory at Jones Lang LaSalle MENA, said the rebuilding of investor confidence was critical to encouraging institutional and fund-based real estate investment.

'We are beginning to see the return of investor interest in discretionary funds that provide sound investment strategies, professional and credible management and proprietary deal flow,' he said.

Vast oil wealth and a balanced growth rate, together with a relative undersupply of housing and other asset classes made Abu Dhabi the most attractive investment environment in the region, the report said.

Saudi Arabia would be the strongest performing market over the period, according to a quarter of respondents. While the survey also found that Jeddah and Riyadh offered the most potential, with the market further boosted by Saudi's economic cities hitting the market towards the end of the year. A massive undersupply of housing, particularly in the middle income sector, would continue to drive demand in the kingdom.

Almost twice as many as respondents than last year's survey suggested Qatar would outperform other markets. Strong GDP forecasts and enormous per capita wealth made the small Gulf state the most insulated from a protracted global downturn. However, the study said, significant future supply may temper real estate performance.

A combination of the international financial slowdown and a flood of new supply on the market had hit Dubai's sector hard, the report said. But the emirate may prove to be one of the most lucrative real estate investment opportunities in the region, with steep adjustments in capital and rental values offering fairer values and greater yields to returning investors, it said.

All markets in the region were in the downturn stage of their cycle with 2009 seeing a further erosion of values in all markets, the study found. It said the region's governments had reacted swiftly to the downturn, compared to their counterparts in more mature economies.