Welcome to Zawya Markets. Each Sunday we will be featuring an interview with a different analyst or markets expert from around the region.

If you would like to participate please email gerard.aoun@refinitiv.com.

1) What is the general outlook for the real estate sector in the MENA region?

At CBRE, we think the MENA region is undergoing an interesting period of transition. In Saudi Arabia, for example, 2018 can be marked as a year of social transformation. In April 2018, the first cinema opened in the kingdom’s capital, Riyadh, which was later followed by women driving. Furthermore, GDP forecasts for 2018 are reporting healthier growth rates compared to 2017. This, combined with the social changes, feeds positively into the overall market, and will help support growth across all real estate asset classes going forward.   

2) What are the biggest risk factors for the real estate sector in the region?

The oversupply of units across the various real estate asset classes continues to be flagged as a concern. This coupled with regional challenges will continue to pressure sales and rental prices, but we are noticing that this rate of decline has started to show some stabilization.

3) What is the outlook for the property market in the United Arab Emirates?

A number of reforms have been announced across the UAE since the beginning of 2018. In the residential sector for example, we believe that the long-term residency visas will impact the residential market in the UAE positively – giving expats more security over their rights to remain in the country. This in turn could lead to increased sales volumes as confidence is restored in the market. Additionally, the decision to grant expatriate retirees visas which are valid for five years and are subject to extendibility, could further open the market to secondary and/or senior housing, ultimately increasing the demand for residential units.   

4) What is the outlook for the property market in Saudi Arabia?

The government of Saudi Arabia is actively investing in diversifying its economy away from its previous reliance on oil. At CBRE, we see a lot of opportunities across the different real estate asset classes, with particular focus on leisure and entertainment. The mega-scale projects which are underway, such as Qiddiya and Neom, should pave way for added business opportunities for hotel and retail operators across the kingdom.  

5) How is technology expected to change the dynamics in real estate going forward?

The hot topic at Cityscape Global 2018 was technology. There is no doubt that it is embedded in all aspects of our lives, and real estate is no exception to that. Within the retail domain, the continued growth of e-commerce and online retailing is changing the entire landscape of traditional retail. The emergence of online platforms - from souq.com to noon.com - is prompting retail operators to become more innovative to maintain and potentially increase the footfall into their retail malls. In the realm of hospitality, hoteliers are constantly looking at ways to improve their guest experiences – with technology playing an important role. Smart TVs are one example, which allow guests to access their media accounts. 

6) What is your view and the expectations for Expo 2020?

The Expo 2020 will have positive long-term effects on the overall economy, with the property sector being no exception. The development of large-scale infrastructure projects, in the lead up to the event, will support the development of new areas in Dubai, thereby creating further investment opportunities (both local and international investments).   

7) What is the outlook for the hotel industry?

To achieve the targeted visitor numbers in the respective GCC countries, the hotel industry in the region must increase their accommodation capacities and there is a significant portfolio for both under construction and planned projects. At present, the GCC region encompasses more than 2,000 ongoing hospitality projects, of which two thirds are in the UAE and Saudi Arabia. The incoming supply will add pressure on Average Daily Rates (ADRs) as well as occupancy rates, adding more reason for older properties to undertake refurbishment measures.

8) What can you tell us about delayed projects in the region?

Delayed timelines are an inevitable part of a project’s lifecycle. These are due to a number of factors, which vary from funding to general delays in construction activity. We normally look at the average materialization rate for projects over the last few years to estimate what percentage of under construction supply will be handed over in any given year.

9) How is Vision 2030 in Saudi Arabia affecting the property market in the kingdom?

The Vision aims to alleviate the kingdom from its previous reliance on oil. Carried out through the PIF [Public Investment Fund], the plan will enhance the development of sectors such as entertainment, healthcare and education (to name a few) which will enhance the opportunities for real estate developers. In the residential domain, the Vision’s aim to increase Saudi homeownership to 52 percent (in line with the Ministry of Housing’s objectives) further supports the growth opportunity for residential units (particularly in the mid-scale or affordable category). 

10) Are easing regulations beneficial to the GCC markets?

The GCC countries are targeting new source markets and, as such, are easing their visa requirements – this is to achieve their respective targeted visitor numbers in line with their visions (for example, Dubai 2020 Tourism Vision, Saudi Vision 2030, and Oman Vision 2020). The UAE and Oman now grant visas on arrival to Russian, Chinese and Indian citizens, while Saudi Arabia also recently announced its own plans for the issuance of tourist visas from the beginning of 2018.

(Editing by Gerard Aoun and Shane McGinley)
(gerard.aoun@refinitiv.com)

Any opinions expressed here are the author’s own.

If you would like to participate in the Zawya Markets Weekly Q&A please email gerard.aoun@thomsonreuters.com.

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