MENA Property a Safe Haven Amid Global Uncertainty in 2012

January 16, 2012


MENA Property a Safe Haven Amid Global Uncertainty in 2012Global investors, seeking a safe haven for their wealth amid uncertain economic conditions, are increasingly shifting capital into MENA real estate, according to the region’s largest luxury developer DAMAC Properties.

The emerging trend is the result of a combination of factors, the most significant of which is the stabilisation of property prices, coupled with attractive rental yields of between 7-12%, according to CB Richard Ellis.

“The European debt crisis is likely to constrain real estate prices across the Eurozone, the U.S market is still flat and with China and Hong Kong property prices tumbling, the Middle East by comparison, is looking increasingly attractive” said Niall McLoughlin, Senior Vice President of DAMAC Properties.

According to recent reports by HSBC, in 2011 property was the third best performing asset class after sovereign bonds and gold. While gold and sovereign bonds have traditionally been safe haven investments, over the past twelve months, both have become highly volatile and speculative.

“It’s been more than three years since the global financial system imploded, and everyone is looking for a safe place to invest. Gold yielded 9% last year, that’s if you survived the severe price fluctuations. Meantime, you could have achieved upto 12% rental yield on the right Middle Eastern property, without the stress” McLoughlin pointed out.

High Net Worth Individuals (HNWI’s) have been increasingly shifting capital into real estate. According to an investor sentiment survey released by real estate advisory firm Colliers, 60% of investors globally plan to expand their real estate portfolios over the next 12 months.

The sentiment is shared by UK investment manager Barclay’s Wealth, which recently released a report in which 100% of HNWI’s from Qatar believed that real estate will be a safe sector of investment over the coming year.

“At DAMAC Properties we predict that Saudi Arabia will be the strongest performing real estate market in the region in terms of capital growth. In addition, both markets also offer extremely attractive rental yields” said McLoughlin.

Investment bank Rasmala is predicting property prices in Saudi Arabia may rise by five percent annually over the next two consecutive years.

“There is very strong positive sentiment about the outlook for Saudi’s economy, and that is fuelling demand for high quality properties within the Kingdom. We are seeing strong demand from both end users and investors seeking a market with high yields and plenty of scope for capital growth” El Chaar commented.

While the UAE is poised for more modest capital growth compared to its GCC neighbours, the fact that prices have now stabilised in premium locations in Dubai and Abu Dhabi, means that high rental returns make investing in the UAE property market an attractive proposition for global investors.

“The property market in the UAE has changed considerably, and for the better. In the years leading up to the economic crash in 2008 investors were chasing capital growth, now they are focusing on the rental yield” McLoughlin said.

“Investors are coming back to the market, not because they think the price of their property will double in a matter of months, but because they are comfortable with consistent, sustained and globally competitive rental returns” El Chaar concluded.

2011 was a very positive year for DAMAC Properties. The company handed over a total of 21 buildings, successfully launched its Versace-branded residences in Saudi Arabia as well as its hospitality offering ‘DAMAC Suites and Spa.’ In addition, the company won a string of regional and international awards including being named ‘Developer of the Year’ in the Big Project BGreen Awards.