ME investors eye overseas property market
Dubai, November 8, 2010
Majority of the investors in Middle East region are focusing on overseas investments as part of their risk-reduction strategy, according to a new survey by Colliers International, a real estate services firm.
Colliers survey said the region's investors appear to have less expansionary strategies than six months ago, when 67 per cent said they were seeking to adopt expansionary strategies.
'A total of 63 per cent of those surveyed now say they will be looking to actively reduce risk levels and 25 per cent said will look to increase the diversification of their portfolio.'
The principal investment targets for respondents were a combination of major western cities such as London, New York, Paris and emerging markets such as China and India, the survey revealed.
Middle East respondents to Collier's 'Global Investor Sentiment Survey' view the market as still approaching the bottom, putting the recovery at 4o’clock on the “Global Property Clock.”
The Global Property Clock equates market cycles to specific times, with 12 o’clock representing the top of the market and six o’clock representing the bottom. Each six-hour period in between designates rising (after 6 o’clock, to 12 o’clock) or declining (after 12 o’clock, to 6 o’clock) cycles.
About 38 per cent of Middle East investor respondents expect to either expand or maintain their current level of real estate holdings over the next 12 months, against 25 per cent seeking to actively contract their portfolios.
This represents a massive reduction in expansion plans compared to six months ago and implies an overall degree of risk management, said a top Colliers official.
“The results of this survey suggest the Middle East real estate market has not moved at all over the last six months, but on the plus side, investors do believe the market is set to find its floor over the next year,” said John Davis, regional CEO and director of Colliers International Global Investment Services.
“In addition, the results of Colliers 2010 Cityscape Survey also reflect this sentiment, with the majority of exhibitors interpreting the deceleration in the decline of prices and rents as a signal that the market may bottom out in the next year,” he remarked.
In terms of selling strategies, 50 per cent of Middle East investors intend to sell out of some of their domestic holdings over the next year compared to none with plans to sell any of their foreign real estate holdings, Davis said.
This further reinforces the view that investors from this region plan to grow their overseas holdings at the expense of their domestic ones as part of a risk-reduction strategy, he added.
The survey said the Middle East investors were also split on the future outlook, with 50 per cent believing that a double-dip recession was likely.
Those investors expecting a dip attribute this to high levels of property debt and general over-supply of property in their region, but it should be noted that not all of the sub-regions are afflicted by these factors and this explains the split in opinion, it added.
The survey reflects the views of exhibitors at the region’s leading industry event, indicates that prices are expected to fall further before making a slow recovery in 2011.
One in four developers declined to give their forecast on the future of the market, a rise on the previous year, and developers generally were refusing to offer discounts in the wake of significant price declines.
However, a number of new financing mechanisms, such as 0 per cent mortgage repayments for three years for those with a 50 per cent deposit, offered some hope of enticing buyers back into the market.
Globally, the largest group of survey respondents, which included real estate investors in every region of the world, put the Global Property Clock for their particular regions at eight o’clock, with the second and third largest groups at six and seven o’clock, respectively.-TradeArabia News Service