GCC Real Estate in Q4 of 2012

· Markets started gaining strength during 4Q12

· UAE and Saudi markets continue to lead amongst the GCC

· Upcoming new additions to hurt rental rates

UAE: Dubai’s real estate market continued to outperform Abu Dhabi’s market in 4Q12. Dubai’s residential market saw prices increase in the range of 21–24% while Abu Dhabi market saw prices stabilizing. In the hospitality segment, Dubai’s occupancy levels increased 2 percentage points to 77% in 2012 while that of Abu Dhabi declined 5 percentage points to 57%. In Dubai’s retail segment, higher demand from international franchises and increasing consumer spending is expected to push rental rates up. On the other hand, the Abu Dhabi retail is expected to remain stable with retailers remaining cautious about expansion in the near term.

Saudi Arabia: The Saudi real estate market remained largely buoyant in 4Q12. Rental rates for office and residential property in both markets (Jeddah and Riyadh) increased 2-3%QoQ, while residential sales improved during the quarter. In the hospitality segment, Jeddah continued to outperform Riyadh; ADR in Jeddah increased 9.3%QoQ, while that in Riyadh was down 4%QoQ. Meanwhile, the retail segment continued to remain stable; however the segment may face some pressure in the next quarter as a result of increasing competition to attract new tenants.

Qatar: Qatar’s residential market was mostly static during 4Q12. Despite an improvement in demand vis-à-vis previous quarters, increased supply of new stock restricted growth in rental rates and sales prices, which is expected to persist in 2013. However, the retail segment remains undersupplied and is expected to see an upward trend in the coming quarters.

Bahrain: The office and residential rental markets continued their weak performance amid the ongoing political gridlock situation in the Kingdom. The office rental market is expected to remain sluggish with persisting issues of parking and access. However, sales activity in the residential sector increased during the quarter.

Kuwait: The overall traded value of real estate properties increased 32.6%QoQ to KWD749.2mn in 4Q12 due to an improvement in sentiment with a gradual stabilization in the market. All of the segments recovered during the quarter, with the residential sector rising 35.3%QoQ. The market is expected have seen an uptrend during 4Q12, especially after a standstill in 3Q12. At the same time, existing undersupply in the market may lead to higher prices in the coming quarters.

Oman: Key residential markets witnessed signs of stability with rental rates remaining mostly unchanged in 4Q12. The office market also remained stable during the quarter, but oversupply continues to be a cause for concern and may push rental rates downwards in the coming quarters. The warehousing segment remained firm with rising demand led by expansion in the country’s industrial sector.