To maintain the current growth momentum, property analysts suggest that Dubai’s initiatives to reduce real estate oversupply issues and oversee private sector building activity should be replicated across the GCC real estate markets.
According to analysts at Kamco Research, the GCC residential real estate market, which rebounded in the first nine months of 2019, will require a mix of reduced forthcoming supply and lower transaction prices to maintain growth rates in the medium term.
“In our opinion, government actions such as the introduction of the Dubai Government’s Higher Real Estate Planning Committee should aid in lowering oversupply issues and monitoring private sector real estate developer activities.” A tighter supply would also be required to limit tenant movement and, as a result, a decline in rent.” they said.
According to Kamco Research, real estate sale transactions in the GCC excluding Bahrain rebounded in the first nine months, with total value transacted increasing by 15% to $68.8 billion, up from $59.7 billion in the same time last year. In the first three quarters, the number of transactions increased by 25% over the same period, reaching 429,410.
The Real Estate Sector in Dubai is a Driving Force:
Saudi Arabia and Kuwait were the key drivers of the region’s transaction increase, with transacted value in Saudi Arabia increasing by 36% year on year and transacted value in Kuwait increasing by 9.4% compared to the same nine-month period in 2018. “However, our calculations show that the increased transactions were offset by lower achieved prices, as the average value per transaction in the GCC fell by 8% to roughly $160,200 in the first nine months from around $174,000 in the same 2018 period,” it said.
According to the research, aggregate credit to the real estate industry given by GCC banks at the end of the third quarter was down 0.7 percent quarter-on-quarter to $204.1 million.
Year-to-date, real estate equities in Abu Dhabi and Kuwait have been the greatest performers. Aldar’s outperformance (plus-46%), resulting from the announced freehold law, and the government contracts secured by the business, were primarily responsible for the outperformance of ADX listed real estate stocks. Saudi Arabia continues to be the leading contributor to GCC real estate transactions, accounting for approximately 51% of the total amount transacted and 54% of the total number of deals in the nine-month period.