Dubai is preferred property market for Mena investors

The seventh Jones Lang LaSalle Real Estate Investor Sentiment Survey (REISS), which queried more than 150 institutional investors from across the Mena region, found that real estate remains a popular asset class among Middle East investors, with more potential buyers than sellers in most markets.

The report said Dubai has regained its status as the preferred market in the region due to a number of factors including its recovery in prices and rental values, stable political situation, improved economic fundamentals, and better transparency compared to other regional markets.

"There are both structural and cyclical reasons why Dubai represents the preferred investment market at the current time, with the attraction of the current market being further enhanced by the greater range of investment grade real estate relative to other markets in the region," the report said.

Saudi Arabia was ranked as the second most favourable market by respondents, as its property sector benefits from a large local population, high energy prices and a stable political structure which has insulated the market from social and political unrest.

Abu Dhabi was ranked third, but the report said the emirate is at a less attractive stage of its cycle for investors than Dubai, with prices and rents continuing their downward trend in most sectors, the report noted. The Abu Dhabi market is further hindered by the lack of investment grade properties and the limited number of locations where GCC and foreign investors are allowed to buy.

Overall, respondents indicated a desire to rebalance their portfolios, through selling non-core assets and purchasing properties that better match their long term investment criteria. Almost 50% of the respondents to this year's survey claimed to be ready to dispose of some of their assets while at the same time seeking to acquire suitable products at the right price.

"At a macro level the MENA real estate market is more optimistic this year, buoyed by continued high oil prices, improving economic performance and greater stability, said Craig Plumb, Head of MENA Research for Jones Lang LaSalle. "However little money is flowing into real estate from players outside the region and the investment market continues to be dominated by locally based players."

The report also noted that Middle Eastern investors remain major players on the global real estate stage, purchasing a total of $5.3bn of real estate outside of the region during the first 9 months of 2012 (more than in the entire year 2011).

London is the primary destination of choice for Middle Eastern investors, who have purchased a total of $2.3bn in the UK over the first 9 months of 2012, more than twice the $1.2bn invested during the same period in 2011.

Among the major deals are One Cabot Square, (Credit Suisse Headquarters), Canary Wharf, London purchased by Qatar Investment Authority for $527m, 1 Bunhill Row in the City of London, purchased by St Martins Property Corporation (from Kuwait) for $290m and 68 King William Street London.