The United Arab Emirates has risen significantly from 31st to 18th place in the 2010 Real Estate Global Opportunity Index from consultants AT Kearney which focuses on emerging markets. Saudi Arabia is in fourth place and Egypt has moved from 39th to 22nd.
Designed to help property developers decide where to expand outside familiar markets, the index examines real estate development potential based on construction spending and growth, as well as risk potential and ease of doing business.
Asia remains the top global region with six countries in the top ten. China top the league followed by South Korea and India. In fourth place is Saudi Arabia followed by Brazil, Taiwan, Russia, Poland, Singapore and Hong Kong.
‘Recently, conditions in most emerging markets seem to be improving thanks to government stimulus, infrastructure investment and a resumption of lending. In large emerging markets such as India and China consumer needs not speculators will drive long term demand,’ the report says.
‘As interest rates fall mortgage markets are re-opening in support of new developments, particularly in Saudi Arabia. Real estate investors are also seeking structured and more liquid investment vehicles that have more transparent governance rules,’ it adds.
It is the Gulf region that holds most promise. ‘Low real estate prices could put the UAE back on track for attracting foreign investors, who are already interested in the region for its other advantages. Gulf oil reserves, amounting to more than $5 trillion, give the area ample financial strength, and the region's lifestyle, particularly in the UAE, is attractive to foreign companies. As development projects are tempo¬rarily or permanently halted, the oversupply will begin to diminish, the report says.
Dubai's experience, where prices have dropped up to 50% in the last year, should offer a cautionary tale for the other GCC countries to manage supply in accordance with demand, it says. ‘At the same time, though, Dubai's capacity to rebound fast should not be underestimated. Both Dubai and Abu Dhabi recorded their best real estate results in almost a year during and since the summer. For investors, the UAE real estate sector remains cheap in relation to its global peers,’ it adds.
On the positive side the report points out that the UAE's governments have shown a clear dedication to continuous infrastructure investment and in the long run oil revenues will support future rebounds as prices rise and supply tightens.
In Abu Dhabi tourism and airport traffic are up, bank lending criteria for residential sales have been relaxed, construction costs are down 30% since the end of 2008 and the country remains cash-rich, the consulting firm says.
Abu Dhabi also had a large number of large scale projects under way including Sa'adiyat Island, Al Sowwah, Reem Island and Masdar, the world's first carbon-neutral city. It has a $200 billion real estate plan and many high visibility projects, such as the suc¬cessful Formula 1 racing event on Yas Island, and is supported by a relative undersupply in both Grade A commercial and residential segments and an economic vision based on attracting a diverse set of industries.
