Improving sentiments drives GCC real estate markets

GCC Real Estate Performance in Q3 of 2013

· UAE and Saudi remain upbeat in 3Q13

UAE’s real estate market remained buoyant in 3Q13, with strong growth in rentals and sales prices across the markets of Dubai and Abu Dhabi. Prices increased 18%YoY in Dubai’s residential sales market, while Abu Dhabi’s market saw prices rise 5%QoQ. In the hospitality segment, Dubai’s occupancy levels increased 2 percentage points to 79% in 3Q13, while those of Abu Dhabi rose 6 percentage points to 64%. Office rentals rose up to 3%QoQ in Dubai, while Abu Dhabi saw rates stabilizing during the quarter. Strong economic fundamentals and improving market sentiments continue to drive the real estate market in the country. In addition, Dubai winning the bid to host the World Expo 2020 is expected to provide a fresh impetus to the sector but not in the short term.

Saudi Arabia’s real estate market continued to improve in 3Q13. Housing and hospitality segments across Jeddah and Riyadh remained buoyant, driven by strong government expenditure. However, Riyadh’s office market continued to suffer from an oversupply of stock leading to decline in rents. Going forward, we expect the housing and hospitality segments to maintain their uptrend. However, rising supply of new stock remains a concern for the office market.

Qatar’s real estate market remained upbeat in 2Q13. The office rental market witnessed rise in rentals across most areas, with demand remaining strong for spaces less than 500sqm. The residential market also performed robustly, with rentals rising 5-10%YoY while occupancy rates remained around 100%. Similarly, residential sales witnessed strong activity, reflected in a rise in number of applications of mortgage valuations.

Bahrain’s real estate market remained tepid during 3Q13 due to the impact of the holy month of Ramadan. The commercial segment continued to suffer from declining demand as a result of oversupply of stock. The residential market remained mixed with demand for apartments remaining strong while that for villas declining during the quarter. Recent trend showed that buyers are more interested in completed infrastructure projects.

Overall traded value of real estate properties grew 79.9%YoY to KWD970.4mn in 3Q13, mainly supported by increased government spending, favorable policies and rising market confidence. However, the market witnessed a 4.1%QoQ fall in value of transactions, which could be attributed to the effect of the summer holidays.

The real estate market continued its recovery in 3Q13, primarily driven by the residential and retail segments. The segments witnessed higher demand during the quarter, driven by improved economic performance and rising consumer confidence. The office market continued to display signs of stabilization, with prices remaining unchanged.