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Fri 1 May 2009 04:06 PM

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GCC banks may curb lending for now – Kuwait’s Markaz

Real estate outlook for GCC is negative on weak demand, says asset management co.

Banks in the GCC will shy away from lending at least for some time, according to a recent report.

In a recently published outlook for second quarter 2009, Kuwait Financial Centre 'Markaz' provided its outlook for various asset classes like equity, fixed income, private equity and real estate.

The real estate outlook for the region is negative due to weak demand while supply is bountiful, the Kuwaiti asset management company said. The reluctance of banks to lend to the real estate and construction sector due to the lack of confidence in the industry has removed the necessary lubricants and pushed the region into deeper negative growth, the report added.

Commenting on the real estate supply in the GCC region, Markaz said, “Vibrant economic growth and liquidity conditions in the past have resulted in an oversupply situation with the significant correction in demand expectations of late albeit with pockets of undersupply.”

In Kuwait, slower economic activity has deeply affected rentals in general and for office space in particular, Markaz noted.

“Properties in prime/good locations have decreased in value the least and the report expects rental rates to start going down from Q3 2009, if current credit market conditions prevail.”

The report has a negative outlook on UAE real estate due to the continuous uncertainties in demand expectations, especially in Dubai. Given the oversupply situation in Dubai, demand is expected to remain constrained, the Kuwaiti firm stated.

“Though Saudi Arabia’s lesser reliance on expat population leads to more stable internal demand generation as a result of population growth, lower economic prospects and lack of an efficient mortgage market keeps demand growth at check for residential properties,” Markaz’s reported estimated.

The report has a neutral view on real estate sector in Saudi Arabia.

Listed on the Kuwait Stock Exchange (KWSE), Markaz is one of the Arab Gulf region’s leading asset management and investment banking institutions.