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Al Masah Capital Ltd reviews 11.9 per cent CAGR for GCC Real Estate markets

Favorable demographics, tourism, hospitality and retail trigger higher per capita income reflecting growth

Hinting at positive growth rates for the real estate markets in the GCC; Al Masah Capital Ltd, region’s leading investment firm published its report announcing a booming GCC economy at USD 1.65 trillion in 2014 as compared to USD 535.7 billion a decade ago.

The reports were in comparison with the global real estate market investments which fell back in 2014 due to policy changes in China and other Asia Pacific countries leading to weakening in land sales. Global real estate investment fell in 2014 for the first time in 5 years, dropping 6.3% to USD 1.21 trillion from 1.29 trillion in 2013. While the recent drop in oil prices have subdued GDP growth in the short term, the GCC economy is expected to recover on back of supportive economic policies and strong performance in non-oil sector. According to IMF, GCC’s economy is estimated to reach USD 2.0 trillion by 2020, with Saudi Arabia contributing USD 902 billion, followed by the UAE (USD 502 billion), Qatar (USD 269 billion), Kuwait (USD 196 billion), Oman (USD 81 billion), and Bahrain (USD 40 billion).

Al Masah also observed that the GCC region as a whole is still heavily reliant on oil revenues while the non-oil sector comprising of manufacturing, real estate, tourism, hospitality, and trade, has emerged as the major growth engine, especially in the UAE. Consequently, despite the steep decline in oil prices in H2 2014, the GDP growth in GCC was not severely affected due to strong performance of the non-oil sector and the large cash buffers, which ensured steady levels of spending and investment. Over the last five years, the GCC economy has grown at an average annual rate of 5.0% against the world average growth rate of 2.8%. Within the GCC region, Qatar recorded the highest growth rate of 9.7%, followed by Saudi Arabia (5.2%), Bahrain (4.0%) and the UAE (4.0%) respectively. The increased contribution of the non-oil sector to the economy has been the major reason for the relatively better performance by the GCC countries, surpassing the growth rates of the developed countries in the last five years.

Post recession, GCC has emerged as an attractive destination for global investors and the real estate and construction sectors have become key economic barometers for the growth in the region. GCC countries are also organizing mega events such as the Dubai World Expo 2020 in the UAE and the FIFA World Cup 2022 in Qatar, which will provide a major boost to the region’s tourism as well as real estate industry in the coming years. However, the private equity investment in the GCC real estate is still recovering from the economic recession in 2009. The recovery rate has been slow due to cautious investor sentiments and the industry has a long way to go before it reaches the pre-2009 levels of investment.

The hospitality, residential and office lease markets remain buoyant in the GCC whereas the retail segment is expected to continue its aggressive expansion in the coming years. With major ongoing commercial projects the GCC Real Estate markets are attracting considerable interests from private sectors to indicate potential for further growth.