International real estate investments by oil-rich Gulf states will increase by a hefty 50 per cent this year owing to the global credit crunch and soaring oil prices, property advisory firm Jones Lang LaSalle (JLL) has predicted.
"GCC countries will continue their aggressive international investment activities. We can also expect to see more landmark transactions closed with the total value of capital exports from the GCC to increase by as much as 50 per cent in the coming year after last year's record growth," wrote Blair Hagkull, Managing Director of JLL Middle East and Northern Africa (Mena), in a report titled "Top 8 for 2008: Predictions for the GCC real estate sector".
As the year sees Gulf states pouring out huge capital on the international property market, JLL said the region will likewise attract global investors into its own real estate sector.
Hagkull said this trend will be influenced by a number of factors such as greater transparency and a decrease in risk perception - both of which are part of the fallout from the global sub-prime crisis - as well as greater access to local debt markets.
"What is perhaps interesting is that global issues such as sustainability, transparency and quality will increasingly characterise the regional sector as its role within the global market crystallises. We expect to see the GCC real estate market continuing to mature, develop and grow," he said.
The company expects Dubai to further improve its transparency standard this year, enough to move one notch higher to the third tier in JLL's Biennial Transparency Index. This would be slightly lower than established second tier markets such as Belgium, Switzerland and Germany.
And with the property boom in the region, JLL also predicted a positive outlook for the hotel and leisure sector.
"Dubai has among the highest [hotel] occupancy rates in the world. We see no change to this. We see other GCC markets outperforming Western markets in this key sector. Cities such as Abu Dhabi and Jeddah will develop strongly," said Hagkull.
However, as supply outstrips demand due to delivery delays, Hagkull said the region will see property prices and rents rising between 10 to 20 per cent.
"In 2008, we expect to see rents at the Dubai International Financial Centre, for example, being second only to the West End of London," he said.
The report, which is the first conducted by JLL for the Gulf region, also forecasted the emergence of a niche market called Greenfield or new city development.
"Greenfield freehold development created the market and had a distinct timing advantage. Projects that fall under the banner of urban regeneration will hold the location advantage as they will, in essence, see the redevelopment of urban central business districts in all key cities of the GCC," Hagkull added.
A spokesperson for the JLL-MENA told Emirates Business that they are planning to conduct the property forecast annually in the GCC.