Details

In light of the growth of non-oil sectors and their increasing contributions to Region’s GDP

The GCC property sector boasts distinctive appeal in meeting all types of domestic and foreign demand

Non-oil sector growth in GCC States projected to rise 3% until the end of the year

Current industry indicators show that the GCC real estate sector is ready to fulfil all types of domestic and foreign demands due to its diverse products and investment options. This is augmented by the price correction trends recorded in sale and purchase transactions, which are projected to continue in a gradual manner that will render real estate products more mouth-watering and fuel demand in active markets.

In its weekly real estate report, Al Mazaya Holding said that the real estate sector has become one of the most influential platforms in the region because of its economic and financial recovery activities. It is no longer surprising that the real estate sector plays a pivotal role in implementing medium and long-term developmental plans. In addition, the sector has become one of the mainstays of the economy all around the world.

The report mentioned that economic diversification plans and activities have gained more ground and efficiency than before. This is due to the stimulus packages and pressures which have created economic platforms that are active and stimulating for other streams such as tourism, processing industries and agriculture in some countries of the region. The sector, therefore, has turned to be one of the main enablers for economic growth and contributors to gross domestic product (GDP) of GCC states.

The report points out that oil continues to be one of the main catalysts for developing the real estate sector to be a major pillar of economy in the Gulf region, as the achievements made by metropolitan cities in the Gulf countries provide clear evidence of the importance of the real estate industry, with oil revenues still accounting for 90 per cent of income streams in Saudi Arabia and 93 per cent in Kuwait where the volume of liquidity in circulation continues to be the main determinant of government spending.

Tourism sector and infrastructure

Al Mazaya believes that there are direct factors that play a major role in supporting the real estate sector and its current and future projects. Atop of these factors is tourism, which is the biggest supporter of the real estate industry, as primarily seen in the influx of tourists to Dubai, Bahrain and Oman which is drawing property and non-real estate investments in myriad areas, including retail trade, accommodation and residential as well as luxury real estate, to these countries.

The report adds that there are other factors creating momentum in areas of real estate, trade and investment, notably the continuation of private sector infrastructure projects that manifest themselves in hosting global events, including the construction of hotels and related hospitality projects. Additionally, the population growth recorded in the main cities stimulates demand for housing units & utilities and revitalises construction investment. This is coupled with the role of governments in providing an investment-conducive climate to attract foreign capital inflows into the realty sector.

Ambitious projects and growth rates

The report also touches upon the nature of projects being implemented and their impact on the investment movement in general and on the real estate industry in particular. More than $1 trillion funds have been allocated to construction projects under execution in the GCC states. More than 200 enterprises are being executed in urban areas, in addition to aviation industry development projects worth more than $55 billion, bringing to 152 the number of projects in the United Arab Emirates, Saudi Arabia, Qatar, Kuwait and Oman, which in their turn will fundamentally stimulate tourism, trade and investment.

Al Mazaya points out that the total value of railway sector developments projects in GCC states is estimated at $240 billion, which will reflect significantly on the movement of passengers and goods. In addition, these projects will facilitate the pace of investment for all major economic sectors, foremost of which is the real estate sector, ultimately spurring a growth rate of 3.4 per cent by the end of 2017.

Infrastructure enterprises and partnership with private sector

Available industry data indicate that Saudi Arabia needs investments of $613 billion in infrastructure until 2040. This comes at a time when the Kingdom is going to finance 80 per cent of the infrastructure projects and to accord a new role to the private sector to participate in maximising investment returns, which will help scale down the number of deferred or cancelled projects in the transport, construction and energy sectors. The report expects government spending on infrastructure and development projects will continue during the second half of this year, and support the private sector in direct and indirect ways. This comes at a time when GCC budgets reflect an increase in government spending on major infrastructure developments, which will accelerate construction of roads, power plants, water, ports and airports. A prime example in this regard is the momentum recorded in infrastructure investments in the UAE and its significant contributions to the country’s economic growth.

Performance of non-oil sectors and privatisation plans

The report highlights the plans and strategies being applied in the GCC states that it says will succeed in reducing existing fiscal deficits to below 2 per cent over the next five years. The growth rate of non-oil sectors in the GCC states is projected to increase by 3 per cent until the end of 2017, compared to 2 per cent in 2016. The privatisation porgrammes that the governments of the region plan to implement are anticipated to bring in myriad macroeconomic advantages, and to ease the burdens borne by the public budgets, with the real estate sector to enjoy investment opportunities created by the economic mobility and high liquidity values.

Availability of financing facilities and price corrections

Concluding, Al Mazaya corroborates the important role of financing channels in supporting and stabilising the pace of construction and funding of various real estate products. The Gulf banking sectors continue to provide the required financing in accordance with the approved credit frameworks and policies on the basis of return and risk calculations. The growth of transactions conducted until the end of the first half of this year reflects increasing financing options for real estate activities, with price correction trends in rental and other property transactions expected to lift the pace of activity and to stimulate demand over the remaining period of this year.