The Gulf states saw $2.8 billion of inbound real estate investments in 2014, far less than the outbound investments from the region to destinations such as Europe, property consultant CBRE said.
According to its latest report, Middle East funds spent around $14 billion in international real estate investments last year, becoming the third largest spender globally.
Most of these investments were made by sovereign wealth funds and investment firms in the Gulf countries that have large cash reserves.
But experts said that such a mismatch could mean that the region is losing out to other destinations by not tapping into the $12 billion opportunity in the local market.
“In real estate there should be an equilibrium,” said Nick Maclean, managing director, CBRE Middle East.
“If we are spending $14 billion out, we should at least be able to get $14 billion in. That is what the opportunity is.”
One of the reasons for the toned down investor appetite is the lack of choice for buyers in the region, he added.
“In the Middle East, buyers are mainly looking for opportunities in the UAE, and specifically Abu Dhabi and Dubai,” said Maclean.
“People see opportunities here to manage assets, to better maintain buildings- all of which might in turn attract investors.”
He also said that many properties in cities such as Dubai are controlled by government, which are not open to investment.
“There is a huge part of the Dubai market, which is not investable. We need good stock to come into the market to attract more investments.
“Even if the government does not want to release it to freehold, it should look at lease back opportunities that will attract more buyers to the region,” he told a conference in Dubai.
“The government has great opportunity to release pent up capital and allow investors to come in and spend.”
CBRE’s Director of Global Capital Markets Research Iryna Pylypchuk said that the region also needs to have the right legal framework to attract investors.
“Once the legal framework is in, then it will be interesting to see if Asian capital will flow.”
Her comments echo the CBRE report’s findings which point out that Asian buyers, who spent almost $28 billion in real estate investments last year, are closely observing the Middle East market.
“Asian investors have keen interest in income producing real estate and developments, looking to establish their footprint across major global geographies,” the CBRE report said.
“These intentions may well include the Middle East – and there are initial tentative signs of this sentiment coming through from CBRE’s 2014 Asian Investor Intentions Survey, where a handful of investors expressed interest in diversifying into the region.”