A decade of achievement for Mideast

For the Middle East property industry there is no reason to approach the next decade with anything less than pride over its achievements since 2000, and over what may yet be achieved by 2020 – despite the current climate.

This is my final analyses of how the world's property markets have fared in the past decade and, for the Middle East as much as anywhere else, it would be too easy to see everything through the pessimistic prism of the two most recent years.

To do so would be to ignore how far real estate has come since the Millennium.

Although the Middle East's markets are now struggling – as markets are worldwide – a decade ago very few analysts could have foreseen the popularity of Sharm El Sheikh, Hurghada and Egypt's Mediterranean coast for overseas buyers of holiday homes; almost none would have expected the arrival of a standard-setting Formula One track and leisure park complex in Abu Dhabi, which simultaneously became one of the world's leading commercial property markets; and would we have foreseen Bahrain and Qatar linking to become a global powerhouse for commercial property?

Dubai, while suffering a temporary perception problem today, can also be proud of its achievements. I visited early in the decade and saw what was a very tentative start to creating this amazing location. Since that time it has shown extraordinary skill in civil engineering, carving a 21st Century city from a hostile environment and demonstrating how alternative income sources can be cultivated instead of relying on oil.

So if the transformation of Dubai and the wider region is something that should be celebrated when looking back over a full decade, what useful lessons can we pull out of the troubled years of 2008 and 2009? How can we use this experience to help us in future?

Firstly there may be short-term glimmers of hope that the worst is over.

For example, Kuwait's residential market is poised to see price rises of 10 per cent on average – for apartments 15 per cent – in 2010 according to the Kuwait Financial Centre. Lebanon's residential market has performed relatively well in 2009 and is tipped to also hit double-digit appreciation next year. Meanwhile, Iraq – clearly looking forward from its hellish past decade – is considering permitting foreign ownership of residential land and developments from 2011: this would encourage the world's top builders as well as wealthy buyers into its attempt to reconstruct itself.

Secondly, and far more important perhaps, there are long-term signs that real estate sectors in the Middle East are taking steps to make themselves more attractive to those foreign investors who have become more sceptical in the past 12 months.

In Dubai, the likelihood is that there will eventually be a sifting out of the least efficient players – tough love, of course, but essential for success.

We must hope that reports of the Real Estate Regulatory Agency working with the Land Department in Dubai to create stronger protection for investors though increased regulation, are genuine and produce rapid results. If they do, then long-term good will emerge from the Dubai World issue.

That increased transparency may help other parts of the Middle East to reform in this way, too. Abu Dhabi is showing the way.

Officials at its Department of Municipal Affairs are said to be preparing rules changes – to be unveiled early in 2010 – covering increased transparency for escrow accounts, brokers, titles and mortgages, as well as planning consent and building regulations. It is expected that overall five set of regulations will be incorporated in the existing law 19 of 2005 that sets rules for real estate developers, contractors and brokers, covering topics as wide-ranging as off-plan sales and high-rise licensing.

Are these changes a template for how the next decade will unfold in the Middle East?

Will we, perhaps, look back in 2020 and say the first decade of the 21st century was spent on rapid expansion and construction, and that the second decade was spent sorting out the processes to make such expansion sustainable? If so, then we can be very proud indeed and the current recession will have proved to have a silver lining.

There will be blips – some happening within weeks, no doubt, as the global downturn plays itself out. But let us not deny the successes, as well as challenges, which came in the period from 2000 to 2010.

 

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