With a total market valuation of over USD 1.36 trillion, the real estate sector in the GCC region is one of the most valued markets across the GCC region. With over 50 percent of projects and valuations, Saudi Arabia is currently the most esteemed property market across the MENA region. Followed closely by the UAE, the real estate market is the top contributor to the GDP after oil-based revenue streams. Strong economic growth is the prime factor behind the strong growth of the non-hydrocarbon sectors with Saudi Arabia and the UAE being the biggest beneficiaries of the commercial property sectors. In 2023, the F&B sector, the retail sector and the commercial hubs (office spaces) saw a major recovery to inch closer to the pre-2019 levels. Funnily, most of the global residential projects are scared of revisiting the 2018 Housing Market bubble and are looking for fiscal stimulus to attract home buyers.
2023 saw the returning demand for luxury properties and the rising demand for sustainable properties along with short-term rentals. Some of the ongoing projects, such as Saudi Arabia’s USD 1 trillion futuristic city of Neom, Dubai’s USD 25 billion downtown extension, Abu Dhabi’s USD 15 billion waterfront city of Al Maryah island, Qatar’s USD 10 billion sports city of Lusail and Kuwait’s USD 5 billion project for a new city of entertainment called Silk City, have attracted a lot of foreign investments in the MENA region and a gradual growth in demand for the off-plan property market.
Here are the 4 major outcomes of 2023 that could help you in your real estate investment decisions in 2024 in the MENA region.
Beachfront properties, residential properties near parks and green spaces have always been a major draw for homebuyers across the globe. As per reports, Dubai saw over USD 4.91 billion in sales of such homes between January and September 2023. With the rising population of Ultra high net worth individuals and high net worth individuals in GCC and the rising influx of foreign investments, the demand for luxury real estate is bound to grow in 2024 as well in the MENA regions. What makes this investment even more worthwhile is the dearth of new premium properties and the abundance of amenities and Government incentives for the existing prime properties. According to various sources, Dubai, the commercial and tourism hub of the Middle East recorded more than 100,000 new property transactions amounting to around USD 100 billion in the first nine months of 2023. UAE has revealed increase in demand across Abu Dhabi and Sharjah in 2023 due to fresh interests from new GCC investors. Abu Dhabi has been increasingly attracting Global High Net Worth buyers as the macroeconomic factors for the emirate became more favourable in 2023. As per observations, in the luxury property market, ready-to-occupy, furnished properties are always more in demand than off-plan properties as they guarantee faster returns.
Go Green to make your investment lasting
Reports suggest that the demand for sustainable commercial and residential properties has increased by 51 percent in the MENA region in 2023. Some reports indicate the sudden spurt in investments for green buildings in the MENA region due to increased awareness of long-term benefits in these properties. Property developers are working on ways to showcase the ownership value of these properties to overcome the initial high cost. Saudi Arabia, with its Neom project, is aiming to reach its net-zero targets by 2060 and other MENA countries are incorporating technological innovations to make the construction and ownership sustainable. The non-oil private economy is gradually increasing its GDP share against the hydrocarbon economy with rising stimulus from the Government bodies. With foreign entities showing interest in the new non-hydrocarbon economy of the Middle East, the green economy is opening doors to new possibilities, new projects, new employment and new markets.
Long-term investments in short-term rentals
By the third quarter of 2023, the rents for Prime, Grade A and Grade B properties have increased by 7 percent, 8.6 percent and 13 percent respectively. Reports suggest that the rental rates are set to soar in the coming years due to slow growth of new real estate projects in spite of high demands. In the post-COVID-era, there has been a rush for longer lease commitments, especially for the furnished commercial/residential properties. While Abu Dhabi saw a major growth in new rental contracts, Dubai witnessed only a marginal decline in it. At the same time, Abu Dhabi saw a decline in rental contract renewals, while Dubai witnessed a sharp rise, especially in the retail sector. Commercially, Food & Beverage and the retail sector were the major contributors to the property rental market in GCC. While the tourism sector rejuvenates to the pre-COVID levels, the hospitality sector is attracting foreign investments again in the GCC region. As per an unofficial survey, it has been reported that the rental levels in Abu Dhabi increased by 16.9 percent and 36.8 percent in Dubai in 2023.
Dream Homes became Reality
In 2023, reports have revealed that the average apartment prices in Abu Dhabi increased by 0.9 percent while the average price of the villa reduced by 0.1 percent. During the same period, Dubai registered a 19 percent hike in residential prices. However, despite the hike, they still lie below the 2014 baselines making them a prospective investment for 2024 as well. Dubai has also registered about 47 percent hike in tenancy registrations, out of which, there was a 26.4 percent increase in renewed rental registrations and 12.1 percent decline in new rental registrations. This has been the norm that continues since the post-COVID era in 2021.
Mohammed Tahaineh, General Manager of Projects at DAMAC commented: “The UAE real estate sector has historically been a pillar of economic growth and development, fuelled by its attractive investment environment, modern infrastructure, and strategic location. The nation’s resilience has been tested across multiple global challenges. In recent times, following the outbreak of the COVID-19 pandemic, the UAE has witnessed a record spike in growth. In the past three years, global investor attraction has been at an all-time high. From a supply surplus, the real estate sector is facing soaring demand and developers are ensuring to meet the demand across all segments. We anticipate this growth will continue this year, placing the UAE and this region as one of the most sought-after destinations in global investments.”
If there is a lesson that we have learnt from 2023, it is that the luxury market is going to have a good run at least in the first half of 2024 while expecting slight price corrections post April-May. It poses long-term investment opportunities and short-term gains as a hospitality portfolio. Foreign investments turned out to be a big boost for most of the big ambitious projects of many eminent property developers in the Middle East. As long as the GCC region continues its good rapport with India, China, UK and many of the Asian and Commonwealth nations, the foreign funds are bound to flow in the MENA region.
Article by Ujal Nair