Recovery signs seen in ME real estate - report
Categories: Real Estate
Signs of recovery in the Middle East property market are emerging but prices will fall for the next 6 to 12 months, a new report from real estate adviser Jones Lang LaSalle said on Tuesday.
The study for the MENA (Middle East and North Africa) region said that requirements for recovery such as rising oil prices and improved liquidity through the recapitalisation of the banking sector in the form government bailouts has already begun.
Falling property prices presenting good deals for investors would stimulate much needed demand in the market, the report added, citing that transactions in Dubai have doubled over the last month to $500m up from $250m.
However, the study warned that the timing of the recovery will vary across the Gulf and predicts no significant upturn in the market until 2011, with prices remaining flat in 2010.
“Driven by vanishing liquidity and the subsequent decline in investor demand, many of the regional markets have been characterised by a negative spiral which has been driving prices down over the past six months,” the report said.
“The key to reversing this “credit default spiral” will be a return in investor confidence. Just as markets feed off negative sentiment when they are declining, so they will feed off positive sentiment once the seeds of recovery are recognised,” it added.
A number of factors have contributed to a more positive outlook for the MENA region, the report argued.
Oil has risen by around 25 percent in the last month, going over $50 last week for first time in two and a half months. At 11.20am on Wednesday a barrel of Brent crude was $53.57.
There has been significant injection of liquidity across the Gulf in the last few months. Kuwait last month approved a stimulus package worth $5.08bn and Abu Dhabi pumped $4.4bn into the system to recapitalise local banks.
The Dubai government in February said it would issue $20bn in long-term bonds, the first tranche of which ($10bn) has been fully subscribed by the UAE Central Bank.
Jones Lang LaSalle said the correction was necessary to create a better regulated and more transparent property market across the region.
The study for the MENA (Middle East and North Africa) region said that requirements for recovery such as rising oil prices and improved liquidity through the recapitalisation of the banking sector in the form government bailouts has already begun.
Falling property prices presenting good deals for investors would stimulate much needed demand in the market, the report added, citing that transactions in Dubai have doubled over the last month to $500m up from $250m.
However, the study warned that the timing of the recovery will vary across the Gulf and predicts no significant upturn in the market until 2011, with prices remaining flat in 2010.
“Driven by vanishing liquidity and the subsequent decline in investor demand, many of the regional markets have been characterised by a negative spiral which has been driving prices down over the past six months,” the report said.
“The key to reversing this “credit default spiral” will be a return in investor confidence. Just as markets feed off negative sentiment when they are declining, so they will feed off positive sentiment once the seeds of recovery are recognised,” it added.
A number of factors have contributed to a more positive outlook for the MENA region, the report argued.
Oil has risen by around 25 percent in the last month, going over $50 last week for first time in two and a half months. At 11.20am on Wednesday a barrel of Brent crude was $53.57.
There has been significant injection of liquidity across the Gulf in the last few months. Kuwait last month approved a stimulus package worth $5.08bn and Abu Dhabi pumped $4.4bn into the system to recapitalise local banks.
The Dubai government in February said it would issue $20bn in long-term bonds, the first tranche of which ($10bn) has been fully subscribed by the UAE Central Bank.
Jones Lang LaSalle said the correction was necessary to create a better regulated and more transparent property market across the region.
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