For global private capital, all roads lead to the Middle East’s real estate
The real estate sector of the Middle East has always been attractive to investors across the world — private capital flocking to the region and raking in good returns has been happening for quite some time now. But post-pandemic, the property market of the region, particularly in the GCC hub, is fast becoming an outperformer in drawing global private capital. Demand for property remains high — the holiday home sector is on the up and up, residential units are doing a roaring business, office space has a number of takers, and retail is booming, with new projects on the anvil.
Middle East: The region of choice for investors
As mentioned earlier, the Middle East’s real estate market has historically been an attractive economic sector and a preferred choice of investors. This is owing to multiple reasons. The property market is buoyed by strong demand, thanks to a growing well-heeled domestic population; a constant influx of wealthy immigrants, many of whom eventually take up permanent residence, particularly in the UAE, Qatar, and Kuwait or buy a property that serves as a second home; good quality of life, good governance, and stable political atmosphere; and last but not the least, excess liquidity from oil.
Progressive and proactive governments of the Middle East have realized the importance of the real estate sector, which has been playing a catalytic role in shaping their economies and enabling them to reduce their dependence on oil. Local governments in cities such as Dubai, Abu Dhabi, Doha, Kuwait City, Riyadh, and so forth are actively working to establish ambitious smart cities and urban development projects.
Dubai is one of the world’s most affordable luxury home markets. Qatar’s residential real estate market is set to register a CAGR of over 6.24% between 2023 and 2028(1), Saudi Arabia’s Vision 2030 agenda helped it to grow its economy by 8.8% in 2022(2) — the highest level for any major economy — and Kuwait’s real estate sector has recovered from the lows caused by the pandemic. A lot is happening out there!
The Middle East’s real estate markets are literally fuelling an economic boom. From Dubai to Riyadh, house prices are rising, and office rents are going up as international businesses set up their offices or expand their existing presence in these dynamic cities. The pro-business mindset of the GCC nations, particularly the UAE, is greatly enhancing the appeal of the region as the place to invest private capital. Such is the demand for prime residential property in some cities that prices are recording phenomenal hikes. Take the case of Dubai, where prime home prices shot up by 44% in 2022.
By and large, strong fundamentals, government support, steady population growth and the accompanying need for residential spaces, the safe-haven image of the GCC region, and the promise of a good quality of life, safety, and security are some of the reasons why global private capital is headed towards the Middle East. The region has a lot going for it and is bound to offer good returns on investment. As real estate developers and investors alike redefine and evolve their business models and strategies to ride the wave, the returns will only soar.