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(MENAFN - Khaleej Times) Abu Dhabi, Qatar and Saudi Arabia — with their vast energy wealth and leaders who are keen to spend on big-ticket infrastructure projects — figure to become the hottest spots in the Middle East for property investors, real estate industry executives said
on Tuesday.
While Dubai is not out of the game, the emirate's property market is struggling to recover from a collapse in demand and dearth of credit, and foreign investors active in the region will likely gravitate elsewhere in search of opportunities. Real estate markets that are supported by robust prices for oil and gas are especially attractive, said participants in a Cityscape panel discussion about the merits and hazards of investing in properties in the Middle East.
Rulers of Saudi Arabia, Qatar and Abu Dhabi all have ample coffers to pay for major infrastructure projects, from a brand-new technology university in Saudi Arabia to Abu Dhabi's energy-efficient Masdar city.
"If the governments are putting money into the markets, then we can all put money in because the governments are not going to let the markets collapse," said Michael Shvo, President and Chief Executive Officer of a property marketing firm called Shvo. Shvo, based in New York City, has an office in Dubai but sees particularly good prospects in Abu Dhabi.
Mohammed Ali Yasin, Chief Executive Officer of investment bank Shuaa Securities, said that macroeconomic factors, including leaders with a desire and ability to spend on public works, give Saudi Arabia and Abu Dhabi an edge. Barring a long-term plunge in energy prices, their governments should continue to enjoy budget surpluses that they can spend on further improvements, which in turn will create a need for new residential and
commercial properties.
In the case of Abu Dhabi, which owns the bulk of the UAE's oil reserves, heavy spending on Masdar, Formula 1 car-racing facilities and major museums such as the Guggenheim will attract foreigners to work in that emirate. These people will need places to live, shop and relax, Yasin said.
Nicholas Maclean, Managing Director of real estate advisory firm CB Richard Ellis Ltd., Middle East, agreed that abundant energy resources can enhance a country's investor appeal. But he warned that significant earnings from oil and gas might also mask deep inefficiencies or even "non-viabilities" in an economy.
"We have to be very careful," he said.
Mohammed Al Ali, Vice-President for Investment Advisory at Kuwait's Al Aman Investment, went further. Oil wealth can be "a long-term curse for the economy," said Al Ali, whose firm is a Shariah-compliant asset manager. While he didn't explain what he meant in detail, economists and others have long argued that too much easy money from resource exports can stifle a nation's entrepreneurial energies, make its population lazy, and
foster corruption.
Niche markets for property investors exist elsewhere in the Middle East, as in Jordan and Syria, executives said. Eng. Imad Fakhoury, Chief Executive Officer of Jordan's public-private Aqaba Development Corporation, noted that Jordan's capital Amman is a much cheaper place to do business now than it was a year ago, due to the effects of the recession.
This improved affordability, together with Jordan's political stability and a huge influx of refugees from neighbouring Iraq — and a consequent jump in domestic consumer demand — could make Amman even more attractive for some investors, Fakhoury said.
While the global recession has had a big impact on the Middle East, not all of it has been bad.
"I think the crisis had a lot of pluses for this part of the world," said
Shuaa's Yasin.
The downturn has hit developed economies harder than it has most emerging markets, so if countries in this region can provide attractive returns and a safe haven for investments, more foreigners will probably want to put their money here, he claimed.
The recession has been "a good wake-up call" for the Middle East, by highlighting the need here for better regulations as a pre-condition for attracting investors from overseas,
Yasin added.
Several executives argued that the region would benefit if its investment regulations were less subject to change. Predictable rules can help offset some of the uncertainty that goes with doing business in
emerging markets.
"This, to me, is obviously the big issue," said Shvo, the property marketer. He welcomed the work of Dubai's Real Estate Regulatory Authority, " but even with RERA, things are changing."
What's at stake is a huge pool of potential investment capital that is now parked on the sidelines, said Maclean of CB Richard Ellis.
"We need to capture that. And if we make it difficult to bring it here, that capital will simply go to another part of the world," he said.
Arguably harder to change are social and cultural factors.
Yasin, a Jordanian by birth and a long-time resident of the UAE, noted that many people in the Middle East feel an especially close emotional attachment to their land. This bond can conceivably retard growth in local real estate markets by inflating land prices and discouraging foreign investment.
By Bruce Stanley (CITYSCAPE 2009)
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