In its series of reports on “Real Estate Sector Outlook in Saudi Arabia and UAE to 2022”, Kuwait Financial Center “Marcus” announced its expectations that the real estate sector will witness rapid growth in both countries. In the second half of 2022. Both reports analyze the performance of sub-sectors; Residential, office, retail and hospitality sectors in the first six months of the year and the impact of various new social and economic policies, reforms and initiatives in this sector.
The two reports, produced by Marmore Mena Intelligence “Marmore”, the research arm of Marmore, based on the “Total Real Estate Index” of Marmore, aim to help investors determine the current state of the real estate market in the GCC region. A number of economic indicators; The most important of them are: oil and non-oil GDP growth, inflation, creation of new jobs, interest rates, population growth and other indicators. The conclusions and observations in the reports are supported by data from the past seven years and provide forecasts for the remainder of the current year and the coming year.
The report “Future Outlook of the Real Estate Sector in the UAE in the Second Half of 2022” indicates that the real estate sector in the UAE generally sees an upswing in 2022, and indicates an increase in the value and rents. Real estate prices. The report also indicates that the volume of transactions in Dubai in the first quarter of 2022 reached its highest total volume compared to the same period in previous years at the level of countries in the region. Among the key factors that have boosted the growth rate of the real estate sector in the UAE are the upward momentum of the national economy supported by rising oil prices, growth in the non-oil sector and the positive results of Expo 2020 Dubai. .
In the 12 months to March 2022, average residential real estate prices in Dubai and Abu Dhabi will increase by 11.3% and 1.5% respectively, with real estate prices in the UAE continuing to increase in 2022. Class A office rents in both the cities continued to rise, registering a 9% and 5% year-on-year increase, respectively.
In the retail sector, Dubai saw an average rent growth of 10.5% in the first quarter of 2022, while Abu Dhabi saw a 7.8% decline in average rents. The performance of the sector remains positive with increased demand from new occupiers both domestically and from international brands. The hospitality market saw significant growth in all key indicators including occupancy rates, average daily rate (ADR) and revenue per available room (RevPAR) in the first quarter.
This rapid growth may slow down in the short term against the backdrop of global events, but is expected to continue the growth trajectory in the long term.
Marcus, based on an assessment of various macroeconomic factors, expects the pace of growth of the real estate sector in the UAE to accelerate in the second half of 2022. Income to enter the real estate market, particularly in light of the availability of relatively high rents and the ability of tenants to afford these rents, is aimed at activating skilled workers in addition to incentive policies related to visas and new work permits. Settle in the emirate and create sustainable urban development projects within the framework of the Dubai Urban Master Plan 2040, while the government is working to boost investor confidence through measures aimed at improving transparency and reporting in the real estate sector and restructuring government agencies. Increase efficiency and enhance the investor experience. However, the report notes that the UAE Central Bank has raised interest rates in line with the US Federal Reserve’s policy, and warns that these higher interest rates will impact consumer spending for the rest of the current year 2022 and 2023. .
On the other hand, the report “View of Saudi Arabia’s Real Estate Sector in the Second Half of 2022” indicates that the Saudi real estate market has started to recover significantly after the slowdown caused by the Corona pandemic. The estate price index in the kingdom rose 0.4% in the first quarter. From 2022, the price of mainly residential land increased by 1.8% per year, while average land prices have generally stabilized with little increase.
The report affirms that measures taken by the Kingdom’s government to ensure that all citizens own their homes and to require foreign companies to have their regional headquarters in the Kingdom have given new impetus to the real estate sector. Other government initiatives such as the “Saghani” scheme, which allows Saudi citizens to own their first home, and the off-plan sales and rental scheme, “Wafi”, have boosted demand for affordable housing. Mega projects in the Kingdom, including NEOM, Red Sea Project and Tria Gate in Riyadh, indicate a shift in consumer preferences and real estate development, the report points out.
Although the real estate price index in Saudi Arabia is below the peak of 2015, it has remained stable in recent months. Transaction volumes in the residential real estate sector decreased by 23.4% in the first quarter of 2022 compared to the first quarter of 2021, and the total value of transactions decreased by 1.9%. On the other hand, the performance of the office sector across the Kingdom improved in the first quarter of this year as average rents for Class 1 and Class 2 office buildings in Riyadh and Jeddah increased by 8% and 3% respectively. In the retail sector, rents in large regional malls fell by 5% and 7% in Riyadh and 1% and 5% in Jeddah, respectively. The hospitality sector has performed well in the Kingdom, particularly in Riyadh, on the back of high numbers of leisure, business and religious visits, and is expected to improve further during the remainder of the year.
The report expects Saudi Arabia’s economic momentum to continue in 2022 in light of rising oil production, with the real estate sector showing greater recovery and stability, with prospects for acceleration in the second half of the year. The report also anticipates growth in the oil sector, increasing domestic investment in non-oil sectors due to public investment funds, government sovereign wealth funds, increased private consumption and an increase in Hajj and Umrah. Travel, relaxation of travel restrictions and all these key factors will positively affect the economy and the real estate sector. Rising interest rates, indicators of weak global growth and rising inflation rates in most countries of the world, which are expected to negatively affect mortgage lending and reduce consumer spending levels, will all be key negative factors, the report points out.
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