The real estate markets of the Middle East will outperform all other regions, said a study conducted by Jones Lang LaSalle (JLL), leading real estate advisory firm, in association with Cityscape Dubai.

The findings from 'Investor Sentiment Survey,' also revealed that almost half of all respondents believed UAE would offer the best performing real estate market in the Middle East over the next two years, with Saudi Arabia to be the next best performer.

Pooling the views of a sample of over 350 developers, sovereign wealth funds and high net worth investors, the survey was the first-of-its-kind indepth study of real estate professionals' market views conducted in the region.

“This report is not only the first of its kind undertaken in the region, it will provide a critical benchmark as we look to evaluate this vital sector in the coming months and years,” said Blair Hagkull, managing director, JLL Mena.

'Sentiment is a critical component when considering the health of any market. It is an important barometer, a key assessment criteria for any investor and the ideal gauge for considering future prosperity.'

The 2008 Investor Sentiment Survey was undertaken in the aftermath of the collapse of US Investment Bank, Lehman Brothers and is thus the most up-to-date and relevant source on investor sentiment in the Mena region, he noted.

The study said over 50 per cent of the respondents believed the real estate markets in the Middle East would see the strongest performance of any region worldwide.

The Asia Pacific, driven by India and China, too has a strong outlook with more than 20 per cent of respondents believing it will be the best performing region, he added.

The study found that investors were least positive towards Western European real estate markets, with only 3 per cent expecting this to be the strongest performing region.

Most Middle Eastern investors do not believe the US and European markets will witness a major improvement in performance in the short term.

'The Middle East is expected to be one of the regions least affected by current global economic conditions. Affects most obviously felt in North America but this could also provide most opportunities for value purchases over the next 12 -24 months.

There is a clear inverse relationship between strongest performing real estate markets and those economies expected to be most impacted by current global economic environment, the respondents said.

According to the study, the Middle Eastern investors are well positioned to take advantage of difficult conditions elsewhere. 'Now is a good time for Middle Eastern investors to export capital through purchase of overseas assets.'

While confidence towards the Middle East is higher than elsewhere, the region is not totally sheltered from the chill winds of the global economic environment. Less than 20 per cent of investors felt that the current economic situation was having a significant impact on ME real estate markets.

Over 40 per cent of investors believe the current global economic environment was having little or no impact on their approach towards real estate investment in the Middle East, the study found.

Investors remain bullish towards the UAE, which is expected to show the best performance over the short to medium term. Saudi Arabia offers strong potential as this large and rapidly growing market continues to open up and offer new opportunities, it added.

Qatar is expected to offer strong performance, building upon its reputation as the next emerging GCC real estate market.

Over 60 per cent of investors are optimistic that global capital markets will either remain the same or improve over the next one to two years.

Commenting on the survey’s findings, Ian Ohan, Head, Investment Transactions, Mena at Jones Lang LaSalle said: 'The Gulf Region offers strong relative international value with active buyers in the region generally looking to transact at 8 - 8.5 per cent yields for prime commercial operating assets and slightly higher for hospitality product.'

'This is consistent with recent market evidence, however will likely bow to upward pressure as the cost of debt rises,' he noted.

'Maturing markets is the key theme here. Asset pricing in the region is increasingly being underpinned by cash flow valuation reflecting a shift from development-led to capital-based real estate markets,' Ohan observed.

'We are anticipating greater transaction activity as sellers' value expectations begin to more closely resemble income valuations as debt markets tighten and speculative exit opportunities decline.'

'Investors are looking for strong capital growth in Abu Dhabi, Saudi Arabia and Qatar, reflecting their robust economic potential and more nascent stages in the real estate cycle. The issue of market transparency is high on the agenda of investors.'

'This is being aggressively addressed through sustained government initiatives including the enacting of international best-practice legislation and the enforcement of strong corporate governance initiatives,' Ohan added.-TradeArabia News Service