By Andy Sambidge
Real estate yields in Dubai compress leading to the creation of a seller's market - report
Real estate yields in Dubai have compressed leading to the creation of a seller's market, Jones Lang LaSalle said on Tuesday in a new report.
Its 2013 Middle East and North Africa (MENA) Real Estate Investor Sentiment Survey found that investors in Dubai's property market are now open to acquiring assets at yields closer to emerging Europe and higher than established markets such as Moscow.
The survey indicated strong demand among regional investors for Dubai real estate, leading to the creation of a seller’s market, which is one of the reasons for the yield compression.
While some interest for land has returned in this year’s survey, most investors continue to prefer income producing assets to development, Jones Lang LaSalle said.
Outside of Dubai, investors are less optimistic, with yields remaining stable in Abu Dhabi and increasing for some sectors of the market in Saudi Arabia, compared to the 2012 survey.
The report also found that MENA investors continue to invest on the global stage having deployed almost $4.9 billion across global assets in the first half of 2013.
While Central London remains the preferred destination for most Middle Eastern investors, they have shown themselves increasingly willing to look at opportunities in other markets, making major sales in Europe, Australia and Japan over the last 6 months.
Dubai, followed by London were the two most preferred markets for regional investors, the report showed.
Gaurav Shivpuri, head of MENA Capital Markets at Jones Lang LaSalle, said: “With the city’s well developed infrastructure, booming tourism industry, buoyant aviation activity and safe haven status, Dubai has emerged has the investment destination of choice amongst its regional peers.
"We have also witnessed an increase in appetite for larger transactions as compared to last year, which indicates to the return of confidence in the sector and market.”
He said other factors that have resulted in stronger investor interest and tightening yields in Dubai include the better regulated environment, improving economic fundamentals and the availability of more investment grade products.
The release of a number of major new projects and speculation around Dubai’s bid for Expo 2020 have also contributed to the prevailing sense of positive sentiment concerning the city’s real estate market, the report said.
Craig Plumb, head of MENA Research for Jones Lang LaSalle, added: “With better economic indicators regionally and globally, the overall outlook for the MENA real estate market looks better than last year.
"This positive sentiment is boosted by continued infrastructure spending and government backing which is further supported by the stability of high oil prices.
"The region remains primarily a sellers’ market, with more potential buyers than sellers in most cities. MENA investors remain net buyers of real estate although we continue to see a large number of investors seeking to rebalance their portfolios, by disposing of non-core assets and acquiring those more in line with their long term investment strategies.”For all the latest real estate news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Must say I noticed that yields are compressing in Dubai.
If there is about to be a multi year increase in Real estate then rents must continue to rise by between 50-100%.
If rents do not rise investors will soon be taking 3 or 4 percent net yields when current property prices are taken into account.
If this happens money will flow out to safer markets with better regs such as London I suspect (which offers a 3 percent net yield approx.).
I believe rent rises are on the way post expo announcement - but who knows, maybe this is the top of the market?