UAE jumps to 18th rank in property potential index

The UAE has risen significantly from its previous 31st rank to the 18th place in the recent Real Estate Global Opportunity Index published by consulting firm AT Kearney."The countries of the Middle East and North Africa (MENA) continue to improve in the Index, even as they are hit by the economic crisis. The UAE jumps significantly, from 31st to 18th place." Dr Dirk Buchta, partner and managing director, AT Kearney Middle East said in a media release on Tuesday.

The 2010 Real Estate Global Opportunity Index is designed to help property developers decide where to expand outside of familiar markets. Focused on emerging markets, the Index weighs real estate development potential, based on con­struction spending and growth, and risk avoidance, a combination of a country's risk and the ease of doing business there.

Since the beginning of the economic crisis more than a year ago, most real estate markets - emerging and mature - have seen plummeting prices, as much as 40 to 50 percent in some Middle East countries, the firm said in its statement.

For the markets of the Gulf Cooperation Council (GCC), and specifically the UAE, which had great price declines in 2008-2009, the Asian recovery following its 1997 crisis offers reason for hope, AT Kearney observed.

“Low real estate prices could put the UAE back on track for attracting foreign investors, who are already interested in the region for its other advantages. Gulf oil reserves, amounting to more than $5 trillion, give the area ample financial strength, and the region's lifestyle, particularly in the UAE, is attractive to foreign companies. As development projects are tempo­rarily or permanently halted, the oversupply will begin to diminish,” the firm said in the statement.

“For developers with some cash, the first step at this point is to reconsider whether to invest in geographic expansion or the transition towards a business of specialization with the opportunity to improve operational excellence and develop ancillary revenue opportunities through asset management.”

According to AT Kearney, Dubai has recently been experiencing oversupply and falling prices affecting most segments. Dubai's experience should offer a cautionary tale for the other GCC countries to manage supply in accordance with demand.

“At the same time, though, Dubai's capacity to rebound fast should not be underestimated. Both Dubai and Abu Dhabi recorded their best real estate results in almost a year during and since the summer. For investors, the UAE real estate sector remains cheap in relation to its global peers.”

"The UAE's governments have shown a clear dedication to continuous infrastructure investment, including a 33 percent increase in Dubai's 2009 budget. In the long run, oil revenues will support future rebounds as prices rise and supply tightens," Dr Buchta said.

In Abu Dhabi tourism and airport traffic are up, bank lending criteria for residential sales have been relaxed, construction costs are down 30 per­cent since the end of 2008, and the country remains cash-rich, the consulting firm said.

"Large-scale projects are in prog­ress, including Sa'adiyat Island, Al Sowwah, Reem Island and Masdar, the world's first carbon-neutral city. Abu Dhabi has a $200 billion real estate plan and many high-visibility projects, such as the suc­cessful Formula 1 racing event on Yas Island, and is supported by a relative undersupply in both Grade A commercial and residential segments and an economic vision based on attracting a diverse set of industries."