The UAE’s residential market remains the top pick for investors from the Middle East and North Africa (MENA) region, according to the latest Real Estate Investor Sentiment survey from property advisory firm JLL.
However, the survey also found that the UAE’s residential sector is expected to perform less strongly over the next 12 months.
Instead, investors expressed strong optimism in the performance of the UAE’s hospitality real estate, in line with increasing tourist numbers and the government’s commitment to support the sector’s growth.
Gaurav Shivpuri, head of Capital Markets at JLL MENA, said: “Although the UAE residential market remains the preferred asset class, investors recognise there is now more limited further upside in this sector and are therefore shifting their attention to other asset classes such as hospitality and offices in the UAE and residential and industrial opportunities in Saudi Arabia.”
Overall, the UAE’s political and economic stability and market transparency continues to attract capital inflows, with 97 per cent of respondents keen on investing in the country’s real estate sector, the survey found.
Within the GCC, 61 per cent of investors are now seeking to invest in Saudi Arabia, up from 38 per cent last year. This year’s survey also saw greater investor interest in Egypt, driven by the stable political environment and the more robust levels of economic growth, JLL said.
The survey also found that Middle Eastern investors are increasingly looking overseas with nine out of 10 respondents considering international markets for investment.
Most popular is Europe and specifically the UK, with regional investors spending $3.6 billion on European real estate in the first half of 2014 – over three quarters of their total overseas spending.
This year’s survey also found growing interest in the US, with 47 per cent of respondents keen to invest in the market, up from 24 per cent in 2013. The region’s office sector is specifically expected to show the strongest improvement in performance over the next 12 months.
Middle Eastern investment flows to North America increased 51 per cent year-on-year in the first half of 2014 to reach $1 billion, JLL said.
Meanwhile, the survey reported that 51 per cent of Middle Eastern investors remain net buyers of real estate. However, more and more respondents are willing to sell their assets – 14 per cent of respondents identified themselves as potential sellers compared to six per cent in 2013.
“This signals a possible change in opinion among some investors on future value appreciation potential,” JLL stated.
The report also revealed that 42 per cent of Middle Eastern investors continue to focus on low-risk, income generating assets with stable cash flows.
“However as yields tighten and it becomes more lucrative to invest on a risk-adjusted basis, JLL sees investors moving up the risk spectrum – 32 per cent expressed interest in core plus/value add projects, an increase from the 27 per cent in 2013,” it said.