ME property market yet to hit bottom

The Middle East real estate market is still approaching the bottom and will find its floor over the next year, according to regional respondents to Colliers International’s Q3 2010 Global Investor Sentiment Survey.

In addition, 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.

Respondents put 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.

“The results of this survey suggest that 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.”

Investors in the Middle East appear to have less expansionary strategies than six months previously, where 67 per cent of investors had said they were seeking to adopt expansionary strategies. A total of 63 per cent of those surveyed now say they would be looking to actively reduce risk levels and 25 per cent said that they would 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.

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. 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.

Middle East investors are also split on the future outlook, with 50 per cent believing that a double-dip recession is 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 likely explains the split in opinion.

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. These responses indicate that most markets globally are on the upswing and are characterised by rising demand, falling availability and vacancy and rising headline rents. This marks a significant move from Colliers International’s last Investor Sentiment Survey conducted in first quarter 2010, when most respondents placed their markets at between five and six o’clock.

“Most of the survey’s top line findings demonstrate a growing optimism in the global real estate market,” said Davis “While current sentiment varies by region, the large majority of respondents felt the market would still be on the upswing one year from now. Optimism in the market is reinforced by the nearly three-quarters of respondents saying a double dip recession is unlikely.”

The Colliers International Q3 2010 Global Investor Sentiment Survey was conducted from August 15 to September 7, 2010. More than 200 major institutional and private investors with holdings of $710 billion and representing a broad cross-section of property investors across the globe participated. The primary purpose of the survey is to better understand global investor attitudes in the current marketplace at a global and regional level, including investors’ outlook for the coming 12 months.