DUBAI, UAE — The economies of the GCC countries are predicted to outperform those of the rest of the globe in 2022 and 2023, which will likely encourage investors from the region to seize investment possibilities in real estate worldwide.
In contrast, the GCC countries are experiencing a reversal of these patterns due to rising investor confidence brought on by the region’s comparatively good economic conditions.
Since mid-2020, the oil price has rebounded strongly, boosting consumer and investor confidence and resulting in significant financial infusions into the global real estate market.
According to the report “Resurgence in Foreign Real Estate Investment in the GCC Countries” by Jones Lang LaSalle: “The confidence of investors around the world is affected by the challenges resulting from the escalating inflation rates, rising energy costs, and tight monetary policy. The repercussions do not stop at delaying investment decisions but extend to weakening the liquidity in the international real estate markets. Thus, a state of uncertainty prevails globally”.
But in the Middle East, especially the GCC, where relatively good economic conditions have helped build market confidence, the trend appears to be the opposite: investors are increasingly looking to take advantage of bargains in foreign markets.
New real estate types are anticipated to become a focal point of investment portfolio strategies. London, Paris, and New York are all cities where the office and hotel sectors were once dominant. Still, in recent years, faster-growing sectors like living and logistics have attracted more than 40 percent of international investment. A shift in strategy over the past decade has seen investors shift their attention to non-traditional industries, including data centers and healthcare assets. The COVID-19 pandemic has bolstered more prominent trends, such as the ongoing effort to diversify financial portfolios.
JLL also projected that the industrial space and logistics services sector would continue to function well despite the slow expansion of the global economy. As a result, long-term prospects remain suitable for the living industry, and it is even predicted to strengthen its resilience, despite recent downturn indicators, such as sluggish rent growth.
The multi-family/dwelling housing market has benefited from the growing interest of investors from the Gulf Cooperation Council (GCC) countries in the living sector since 2020. This sector currently accounts for one-third of all global investments. Because of its rental nature, it will also affect student and senior housing. However, as in the past, the United States and Europe—and the United Kingdom in particular—will continue to attract the lion’s share of Middle Eastern investment.
Oil revenues
According to a Reuters poll of analysts, economic growth in the six Gulf Cooperation Council countries is expected to be half of what it was in 2022 due to the impact on oil revenues from a moderate global recession.
The survey, which was conducted from January 9-23, predicts that growth in the six GCC economies would average 3.3 percent in 2023 and 2.8 percent in 2024, down from 4.2 percent and 3.5 percent, respectively, in October’s poll.
At the same time, the World Bank predicted that GCC economies, led by Saudi Arabia, experienced the best annual growth rate in a decade at the end of December 2022, primarily due to higher energy prices and more excellent production. According to the bank’s study, the Middle East and North Africa region had a prosperous year, growing at the fastest rate in a decade (5.7 percent in 2022) due to the increased price of oil and gas and the larger volume of production.