The title of the latest study from DEGI Research, "Built on Black Gold – the Property Markets of the Gulf Cooperation States" says it all: economic developments and thus the property markets at the Gulf stand or fall with developments of the oil price.
This region’s abundance of raw materials, a blessing for the otherwise hostile natural environment, is increasingly being perceived as unilateral dependence by the six nations of the Gulf Cooperation Council (GCC) Bahrain, Kuwait, Oman, Qatar, Saudi-Arabia and the United Arab Emirates (UAE). Revenues from the oil and gas sectors account for two-thirds to four-fifths of government revenues in the GCC nations. And the correlation between national income and the oil price is even higher.
By diversifying their economies and introducing sustainable concepts, the nations concerned are aiming to counter this, and broaden the scope of their economies to include the financial sector, tourism, trade and industry. The front-runners here are Bahrain and the UAE, with Dubai, in particular, drawing the global public’s attention with its spectacular and visionary construction projects.
DEGI looks at real estate markets at the Gulf
For the first time, DEGI Research has looked at the office and retail markets of the Gulf Cooperation Council nations. One result: Concepts for sustainable development are sought after.
Race for the position as the region’s financial center
The establishment of a financial sector is key for the region’s sustained development. Adducing a series of success-determinant factors for this sector, the analysts at DEGI used the study to examine the prospects of Manama, Bahrain’s capital, and the region’s traditional financial center, Qatar’s capital Doha, and Dubai, for succeeding in this field.
Though in comparison to many other nations of the Near and Middle East, the political and legal framework conditions here are stable and favourable, ambitions for becoming as a global financial center are, in the view of DEGI’s analysts, not justified. A more realistic aim is successful positioning as a regional financial center, with unambiguous specialisation, such as "Islamic banking." Taking all the criteria involved, such as the economy’s size, economic freedom, taxes, quality of life, international transportation links or the office market, it is Dubai, despite higher office rentals than New York or Singapore, that has the best prospects of becoming a regional financial center.
Though in comparison to many other nations of the Near and Middle East, the political and legal framework conditions here are stable and favourable, ambitions for becoming as a global financial center are, in the view of DEGI’s analysts, not justified. A more realistic aim is successful positioning as a regional financial center, with unambiguous specialisation, such as "Islamic banking." Taking all the criteria involved, such as the economy’s size, economic freedom, taxes, quality of life, international transportation links or the office market, it is Dubai, despite higher office rentals than New York or Singapore, that has the best prospects of becoming a regional financial center.
Dubai has the best prospects of becoming a regional financial center.
Office space increases faster than the population
Extensive construction activity is characteristic for all three locations, especially Dubai, where office space is set to quadruple by 2010.
This exceeds even the vigorous growth in population. In all GCC states, the population grew substantially between 1995 and 2006: the front-runner, with a plus of 125 percent, is the UAE, with its high level of immigration. But natural population growth, too, is very high on a global comparison, as exemplified by Saudi-Arabia, with a plus of 27 percent in the same time period.
Overall, the areas available in the region’s office property markets are still comparatively small, a circumstance attributable to the low population levels in absolute terms. Dubai stands out in this context, with 1.6 million square meters of office space. The vacancy ratios are minimal, the peak returns are high on an international comparison, at 10 percent in Riyadh and Kuwait City, though the returns in the UAE are more moderate, at 6.0 percent (Dubai) and 7.5 percent (Abu Dhabi). For investors, however, low transparency remains the salient characteristic of this region’s commercial property markets.
This exceeds even the vigorous growth in population. In all GCC states, the population grew substantially between 1995 and 2006: the front-runner, with a plus of 125 percent, is the UAE, with its high level of immigration. But natural population growth, too, is very high on a global comparison, as exemplified by Saudi-Arabia, with a plus of 27 percent in the same time period.
Overall, the areas available in the region’s office property markets are still comparatively small, a circumstance attributable to the low population levels in absolute terms. Dubai stands out in this context, with 1.6 million square meters of office space. The vacancy ratios are minimal, the peak returns are high on an international comparison, at 10 percent in Riyadh and Kuwait City, though the returns in the UAE are more moderate, at 6.0 percent (Dubai) and 7.5 percent (Abu Dhabi). For investors, however, low transparency remains the salient characteristic of this region’s commercial property markets.
Investments flowing in both directions
The study’s authors, who also illuminate legal aspects of property acquisition at individual locations, come to the conclusion that the GCC states offer an opportunity for property investors to participate in an exceptional growth process, all the more so in that further deregulation initiatives can be anticipated on the property markets, which should meet the needs of foreign investors in particular.
The high level of demand for investment properties abroad should not obscure the fact that between 2004 and 2006 around 8.6 billion US-dollars were invested by the GCC states in the global property markets.
The study is the seventh publication from DEGI Research in the "Property Business Trends" series, and can be ordered at the DEGI website.
As with all content published on this site, these statements are subject to our Forward Looking Statement disclaimer, provided on the right.
The high level of demand for investment properties abroad should not obscure the fact that between 2004 and 2006 around 8.6 billion US-dollars were invested by the GCC states in the global property markets.
The study is the seventh publication from DEGI Research in the "Property Business Trends" series, and can be ordered at the DEGI website.
As with all content published on this site, these statements are subject to our Forward Looking Statement disclaimer, provided on the right.
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