MENA property markets to witness continued growth backed by economic reforms and investor confidence

The MENA region is a developing sector catering to the huge shortage of family residences currently existing in the MENA and Indian sub-continent, said Mr. Mohamed Ali Alabbar, Chairman of Emaar Properties and Director General of the Dubai Department of Economic Development (DED). He said that backed by strong economic fundamentals, high regional liquidity resulting from increase in income levels and investor confidence, the property market in the region would witness robust growth through 2006.

Mr. Alabbar was speaking at the session entitled 'When the Bubble Bursts,' at the annual meeting of the World Economic Forum (WEF) currently being held in Davos. Other panellists at the session included Stephen Roach, Chief Economist, Morgan Stanley, Robert Shiller, Professor of Economics at Yale University, and Barry Sternlicht, Chairman and CEO of Starwood Capital Group. The session was moderated by Pamela Woodall, Economics Editor of the Economist.

Mr. Alabbar later participated in a live televised debate on 'Jobs - Where Will They Come from in the Future?' organised by the World Economic Forum in partnership with BBC World. Mr. Alabbar was part of a 15-member panel of international business and political leaders, who discussed the the vital challenge of linking global expectations for jobs with the massive demographic, generational and structural shifts underway.

Commenting on the real estate boom in the Middle East, Mr. Alabbar said: 'Property prices are firming up in several pockets in the MENA region with a real estate boom firmly in place in cities such as Dubai, Doha and Beirut. Rentals in the UAE have increased by an average of 38 per cent through the year 2005, backed by the nation's surging economy, the liberalisation of freehold property ownership and the increasing number of foreign companies setting up operations in the country. We also expect to see prices holding steady for completed property in 2006 because of the phenomenal building programme in place.'

Mr. Alabbar explained that property in the MENA region is still a developing market and is not directly interlinked with the financial markets, as in mature economies. In addition, the demographics of the region which include a youthful population, combined with the recent real increase in income levels ensure that there is continued investment in residential property.

In the international context, Mr. Alabbar pointed out that there was no global property bubble, since countries like UK, Spain, Hong Kong, Australia and others had already put measures in place to rein in speculation.

He however suggested that there could be a slowdown in the US property market if the proposed sudden rise in the country's interest rates was implemented, leading to a fall in the value of the dollar and making Japanese and European imports into the US more expensive. Mr. Alabbar pointed out that a possible decline in the US property market could also impact the global economic balance, reducing the value of residential property in developed countries.

Stating that the challenge for property investors would be to identify high growth markets that would remain relatively unaffected, Mr. Alabbar emphasised that this is where the MENA region would have a definite advantage.

'With Arab investors repatriating a significant percentage of capital invested in developed markets, the liquidity levels in the region are at an all time high,' said Mr. Alabbar, adding that Arab investors had begun to show more interest in regional investment opportunities and had increased their holdings of Middle Eastern assets in the last three years. 'Much of this capital is being channelled into the property market, because the real estate asset class has proved to be a stable investment option with a high return on investment,' he added.

The investor optimism in the region had also resulted in the Middle Eastern stock market indices witnessing sharp average growth of 80 per cent in 2005, said Mr. Alabbar.

He emphasised that the growing oil demand from China and India would continue to keep oil prices higher than expected as the two countries with broad-based economies would not be overly troubled by a possible US recession.