Initiatives taken by Dubai to curb real estate oversupply risks and for monitoring private sector building activity should be applied across the GCC real estate markets to sustain the current growth momentum, property analysts say.
The GCC residential realty sector, which recorded a rebound in the first nine months of 2019, will require a combination of lower upcoming supply and lower prices for transactions to sustain the growth rates into the medium term, say analysts at Kamco Research.
“Government initiatives like the formation of the Higher Real Estate Planning Committee from the Dubai Government should aid in reducing oversupply risks and monitoring private sector real developer activity in our view. Tighter supply would also be needed to eventually restrict tenant migration and a resultant drop in rentals,” they observed.
In the first nine months, real estate sale transactions in the GCC excluding Bahrain rebounded, as total value transacted improved by 15 per cent to $68.8 billion, as compared to $59.7 billion in the same 2018 period, according to Kamco Research.
The number of transactions also gained 25 per cent over the same period to reach 429,410 transactions in the first three quarters.
The improvement in the region’s transactions was mainly driven by Saudi Arabia and Kuwait, as transacted value in Saudi Arabia gained by 36 per cent year on year, while transacted value in Kuwait moved up by 9.4 per cent as compared to the same nine-month period in 2018.
“Nevertheless, our estimates suggest that the higher transactions came at the cost of lower achieved prices, as the average value per transaction in the GCC declined by 8 per cent to around $160,200 in the first nine months from around $174,000 per transaction in the same 2018 period,” it said.
On the lending side, aggregate credit to the real estate sector disbursed by GCC banks at the end of the third quarter was down marginally by 0.7 per cent quarter-on-quarter to reach $204.1, said the report.
Real estate equities in Abu Dhabi and Kuwait continued to remain the best performers year-to-date. The outperformance of ADX listed real estate equities was mainly ascribed to Aldar’s outperformance (plus-46 per cent), from the announced freehold law, and the government projects bagged by the company.
Saudi Arabia remains the largest contributor to real estate transactions in the GCC, contributing over 51 per cent of the value transacted and 54 per cent of the region’s number of transactions in the nine-month period.