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The US Realty Market remains a favourable destination for Gulf Investments

US Presidential Elections could have a great bearing on GCC Property Investments

Successful real estate investments need expertise and sufficient cash flows to cover obligations. More importantly, buoyancy is necessary to survive investment risks, according to Al Mazaya Holding’s weekly report.

The report noted that modern market indicators term the dynamic US property as a favourable investment destination for Arab and GCC states by virtue of its lucrative yields and high growth rates.

The report notes that the growing competition among key world realty markets has reflected positively on GCC states’ outbound investments and helped boost these countries’ business relationships with world economic powers. Furthermore, the US presidential elections will havea great bearing on the direction of the Arab and GCC realty investments in US over the coming period.

US realty market boasts fiscal stimulus packages that ensure high yields for GCC businesses, including individual and corporate investments. On top of these advantages comes the high demand for property as flexible legislations ensure its sustained attractiveness under all economic circumstances. Moreover, the open economic policy adopted there plays a pivotal role in drawing different kinds of investments from all over the world.

According to the report, the US has several big cities that enjoy a competitive edge, thanks to their diverse and huge natural resources, principally New York and Miami, which are considered among the world’s largest cities that attract foreign investments, including those coming from the Gulf region. Annual real estate investment yields as high as 8 per cent have been posted there, jumping up to 12 per cent in some years, according to the report.

The report attributed the buoyance of the US realty market to its resilient set of rules and regulations. It indicated that office sales and rentals account for a greater share in both local and foreign investments. Industrial property are increasingly attracting foreign investments, pushing their prices by 6 per cent, which resulted in the need to develop more projects to meet the current and expected high rate of demand.

The report also noted that growing employment rates during 2016, investment resilience, high business yields, economic security and political stability are all positive factors that play a major role in increasing demand on commercial and office spaces, noting that demand vastly outstrips supply in many major locations.

The report expected that the future Arab and Gulf real estate investments will be negatively impacted by candidate Donald Trump winning the US presidential elections, with the existing investments to be less affected thanks to their growing returns.

The Arab and GCC states are major trade partners of the US, with the trade exchange between the US and the UAE reaching $25 billion by the end of 2015 and US-Saudi trade exchange posting good growth rates in the same year, rising up to SR170 billion. In the meantime, Qatar is planning to pump more than $35 billion in direct and indirect investments into the US. In addition, Gulf investments in the US are estimated at $612 billion.

The grave implications of the Justice Against Sponsors of Terrorism Act (JASTA), in case of its enactment into a law, would outweigh those of the presidential elections on Saudi-US relations at all levels. The act, if enforced, would have a drastic impact on eminent Saudi figures, credit institutions and charity organisations that will be required to pay billions of dollars in damages. This will create a gloomy scenario that could cause a large portion of foreign investments to flee back to local Gulf markets.

The report underlined the importance of Gulf investments finding out other investment opportunities in the region’s markets, even in developed countries, including China, Turkey and Indonesia, where realty markets are posting high yields without any indirect or direct economic or political repercussions.

The report highlighted that some of the risks that private and public Gulf businesses could be exposed to in the US should Saudi Arabia decide to withdraw from the US market – this includes cash and asset investments. A new major world financial crisis could be triggered if the Gulf countries scaled down their new investments in the US, resulting in drastic pricing deviations in all economic platforms.

In conclusion, the report called upon all Gulf companies and organisations to invest their growing revenues from the oil industry in other fields like finance, real estate and industrial markets that are likely to generate more investment momentum and improve the business environment.