Dubai’s property sector is the most popular asset class for Middle Eastern investors buoyed by its improved economic outlook, stable political situation and recovering rental and values, a report said.
While the emirate is the most popular asset class regionally, European cities such as London and Paris remain hotspots for Middle Eastern investors looking to buy into real estate outside the region, Jones Lang LaSalle (JLL) said in its investor sentiment survey.
“Middle Eastern investors prefer Dubai as investment destination in the MENA region with sentiment towards the emirate improving significantly over the past 12 months,” said the report.
“While the real estate market has lagged [behind] the overall economy, there are now increasing signs that the sector is recovering, at least for selected prime locations. Investment activity and prices are rising, particularly in residential and hospitality sectors of the market,” it added.
Dubai’s property sector, which was hit hard by the global economic downturn in 2008-2009, is starting to show some signs of recovery. Apartment prices increased 5 percent in the second quarter compared with six months ago, according to Knight Frank's quarterly prime global cities index.
Investors have shifted their focus from off-plan property to completed real estate in the wake of Dubai’s property crash.
“As MENA markets mature, they [investors] are placing more emphasis on implementing medium to long-term strategies as opposed to opportunistic, sporadic buying behaviour,” noted the report.
“Dubai-based investors are particularly focused on income-producing assets. The situation differs a little in Saudi Arabia where most of the family offices and high net worth private individuals have large land banks on their books at historical values and are therefore more willing to take development risk,” it added.
Saudi Arabia is the second most popular destination regionally, followed by Abu Dhabi. Increased geopolitical stability in Egypt is boosting investor sentiment and is expected to start attracting regional investors “providing that political and economic stability continues”, said JLL.
Europe, with its political stability and strong legal system, has continued to attract regional buyers. Middle East investors purchased US$5.3bn worth of property outside of the Middle East during the first nine months of 2012, more than the whole of 2011.
London remained the most popular city to invest in with Middle Eastern buyers snapping up US$2.3bn worth of property between January and September, more than double the amount purchased during the same period last year.
Major real estate investments in the capital included Qatar Investment Authority’s US$527m purchase of the Credit Suisse headquarters in Canary Wharf. Regional investors also continued to snap up property in other European cities, most notably in Paris and Budapest.