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GCC real estate sector returning to ‘a stable state’

September 12, 2013 07:28

ver the past decade, the GCC region has witnessed rapid economic development and demographic changes. 

High economic growth in the region has resulted in an influx of expatriates, which in turn increased the total population of the GCC region. Further, high population growth coupled with a rise in per capita income fuelled the demand for building more residential units in the GCC region. 

This was stated in the report on the GCC residential real estate market recently published by Kuwait Financial Centre 'Markaz'. The report examined the current and potential demand and supply dynamics of the GCC residential real estate market. The report also shed light on key challenges, constraints and pricing trends in the GCC residential real 
estate market.

Even though the onset of the global financial crisis in 2008 caused real estate activity in the GCC region to plummet, housing markets have rebounded to a stable state due to efforts of governments. In fact, there is a shortfall of supply in major markets of the GCC such as in Saudi Arabia, the UAE, Kuwait and Bahrain. While the housing market in Oman faces concerns of oversupply in the post-financial crisis period, Qatar is moving towards an oversupply crisis with large additions of housing units.

The residential real estate market in Oman suffers from excessive supply that entered the market in the aftermath of the highs of 2008.  A total of $107 million has been infused into the housing funds in 2012 and the corpus fund for housing rose to $260 million and will increase the demand for housing units in Oman. Large infrastructure projects planned as part of the Eighth Development plan would bring large numbers of expatriates into the country and thus increase demand for residential units. 


Further, supply shortages and increasing demand for housing units are driving housing prices and rental rates in Saudi Arabia. New housing projects planned under social welfare schemes and introduction of mortgages financed by the Saudi government will drive the growth of the residential real estate market. Aggregate demand for housing units in Saudi Arabia is estimated to be 2.4 million units between 2010 to 2020.

Rebounds in the UAE residential sector are the result of the government's efforts to stabilise the market and promote foreign investments. Liberal laws of foreign freehold property ownership will continue to drive the demand for residential properties among expatriates in Dubai.

The Kuwait residential market is characterised by an under supply of housing units and increasing demand for investment housing units due to the influx of expatriates. Limited mortgage financing options and long waiting lists for land allotments hindered construction activity and widened the demand-supply gap. Total housing demand in Kuwait is expected to reach 890,000 units in 2020.      

The Bahrain residential property market showed signs of stabilisation in 2012, after witnessing a decline in rental rates for a period of two years. Low mortgage rates stimulated a surge in demand for housing units, while political unrest in Bahrain has triggered the shift of focus from high-end villas and apartment developments to affordable social housing units.

Meanwhile, Qatar's residential market performed well in 2012. The strong economic conditions in the country and continuous improvements in the standard of living in the state contributed to the increasing demand in the residential sector. The waiting list for housing loans has been cleared in Qatar by an infusion of capital. Increases in the expat population due to major infrastructure projects and preparations planned for the upcoming Fifa 2022 World Cup will increase demand for residential rental properties in the coming years. 

Additionally, increasing land prices, lack of construction finance and limited availability of land remain key constraints in the supply of housing units across the GCC region. Pent up demand caused by exceptionally long waiting lists for social housing in GCC countries is widening the demand-supply gap in the housing market.


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