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UAE drives GCC real estate deals’ surge to $143.1b

Dubai and Abu Dhabi combined contributed to over 48 per cent of the aggregate value transacted, while Saudi added 35.6 per cent to the region’s transactions

Published: Sun 1 Jan 2023, 4:44 PM

Updated: Sun 1 Jan 2023, 4:45 PM

By
Issac John

A general view of Riyadh. Saudi’s residential sector’s demand will continue to be driven by Vision 2030’s target of increasing home ownership to 70 per cent by end of the decade. — Reuters

Driven by the buoyant UAE property sector, real estate sale transactions across the GCC over January-October 2022 reached $143.1 billion, eclipsing the full-year figure of $136.9 billion in 2021 as all sub-segments performed better year-on-year.

Dubai and Abu Dhabi combined contributed to over 48 per cent of the aggregate value transacted, while Saudi added 35.6 per cent to the region’s transactions.

The higher transaction activity in the region was driven by an 81 per cent surge in value transacted in Dubai year-on-year over the period, supported by solid demand and price gains witnessed by luxury residential properties and healthy revenues in the affordable segment, according to Kuwait-based Kamco Invest.

The total value of the region was nearly 21 per cent higher year-on-year compared to the corresponding period from January to October 2021.

The report stated that the number of transactions in the GCC declined by six per cent over 10-month period to 511,239 deals despite a jump of over 61 per cent witnessed in Dubai, as other markets such as Saudi Arabia, Qatar, and Kuwait saw the lower activity as compared to the same period in 2021.

The average value per transaction achieved for markets such as Saudi Arabia (+35.5 per cent) and Dubai (+12.2 per cent) was significantly higher, pointing toward end-user solid demand and investment appetite.

"We reiterate that 2022 will be the new base year for the office real estate demand for both new and existing stock of office spaces. Separately, temperature-controlled spaces, chilled centres, and bonded warehouses continue to command premiums of at least 25 per cent -30 per cent at the top end of the industrial warehouse market," Kamco analysts said.

All real estate sub-segments in the GCC have performed better in 2022 than in 2021, with residential and quality industrial warehouses witnessing reasonable price and rental increases.

In the office segment, supply continues to be tailored towards newer sources of demand such as robotics, IT, and healthcare as these sectors drive faster take-up of such spaces, said the report.

"We reiterate that 2022 will be the new base year for the office real estate demand for both new and existing stock of office spaces. Separately, temperature-controlled spaces, chilled centres, and bonded warehouses continue to command premiums of at least 25-30 per cent at the top end of the industrial warehouse market," it said.

Within the retail real estate market, mall space developers are focusing on the benefits of cross-shopping relationships and its impact on footfalls and consumer spending, when planning and choosing retailer mix.

The strong net operating income (NOI) performance across sub-segments combined with the twin risks of further interest rate hikes and a prolonged period of high rates could potentially have pushed real estate assets in certain geographies into a late-stage expansion phase, the report said.

"Nevertheless, developers remain cautious of these trends, and are expected to announce project launches that are likely to cater to a more normalised demand environment going forward," it added.

Value transacted in Saudi Arabia and Dubai combined reached $107.8 billion over January-October 2022 and could potentially reach close to full-year figures of the entire GCC from 2021.

Saudi’s residential sector’s demand will continue to be driven by Vision 2030’s target of increasing home ownership to 70 per cent by end of the decade, and as of mid-2022 the Saudi Real Estate Refinance Company estimates home ownership to have reached above 60 per cent. However rising interest rates resulted in lower offtake of mortgages, as the number of mortgages over January-October 2022 declined almost 17 per cent y-o-y.

Office supply tailored towards newer sources of demand such as robotics, IT and healthcare will continue to see faster take-up of such spaces.

Investor sentiment gained momentum in 2022 and resulted in opportunistic buying in select GCC markets and residential product types, similar to trends witnessed in 2021. As a result, prices rose y-o-y across markets such as Dubai (+9.0 per cent) and Jeddah (+20 per cent) at the end of Q3-2022, according to JLL.

— issacjohn@khaleejtimes.com