Even before current developments, high average oil prices for the last few years has resulted in huge current account surpluses in the main GCC states, and in a massive swell of private liquidity.

The correction in the GCC stock markets, which saw the Tadawul stock exchange fall in value by some 30 per cent in March 2006, has tempered the acceptability of equities as an investment asset class. Some investors are seeking a safe haven in gold and in government bonds, but many still opt for real estate as the preferred investment asset class.

In many respects, the Gulf region, especially Dubai, Saudi Arabia and Kuwait, has seen a real estate boom in the last few years perhaps unparalleled elsewhere in the world.

Is real estate an over-rated investment asset class as opposed to equities and government bonds? On the contrary, whether in the US, UK, Europe and especially the Middle East, the facts speak for themselves.

In the Gulf-Co-operation Council (GCC) states last year, real estate maintained its position as one of the premier sectors, driven largely by the enormous liquidity in the region due to the high oil prices and increasing demand from various areas.

According to various estimates, private liquidity in the MENA (Middle East and North Africa) countries is a staggering US$2.3 trillion, of which US$1.5 trillion is in the GCC alone. Moreover, the contribution of the real estate sector to GDP in the GCC, according to Global Research, totalled US$27,274 million in 2004, some 5.8 per cent of GDP. Of this, Saudi Arabia accounted for US$12,800 million followed by the UAE with US$8,049 million.

Similarly, the market capitalisation of listed real estate companies in the region totalled US$74,889 million at 13 February 2006 some 6.7 per cent of the total market capitalisation in the GCC. Of this, the UAE contributed US$41,464 million and Saudi Arabia US$17,716 million. This accounted for 2.7 per cent of total GDP. It is interesting to note that Saudi Arabian capital accounts for the vast majority of this investment in the UAE as well as in neighbouring GCC states such as Bahrain.

So what are the current market trends and developments, and the immediate future investment opportunities in this sector especially in the GCC region? What are the latest regulatory, legal and policy dynamics in the GCC which is impacting on investment in the real estate sector?

An interesting feature of the growth dynamics in the GCC real estate sector is that there is a move away from the primary rental market and a greater focus on commercial property development, speculative property purchases and real estate investment funds, which for instance increased to US$2 billion in 2004 from only US$42 million in 2002.

This growth trend of real estate investments is projected to continue over the next few years for several reasons. As a result of the high oil prices, government spending is also increasing. But this has a multiplier effect.

According to the Saudi Arabian Monetary Agency (SAMA), for instance, each new oil riyal of government spending generates up to SR16.6 in additional liquidity.

Perhaps one of the most promising market indicators is that 36 per cent of GCC population is under the age of 15. This alone suggests huge future demand for housing stock. High quality office space is in short supply in Dubai, Riyadh, Jeddah and Doha. This has had an upward impact on prices.

Tourism and hotel rooms are another push factor. In May 2006, Saudi Arabia started issuing its first tourism visas to foreign visitors. With all these factors at play, the timing for a major international real estate conference in Jeddah, the Kingdoms commercial hub, could not be more opportune.

London-based conference group, ICG, in co-operation with the Jeddah Chamber of Commerce and in association with Islamic Banker magazine, is organising a two-day conference, IREF Middle East 2006 in Jeddah, Saudi Arabia, between the 4th – 6th of November 2006 at the Jeddah Hilton.

This is the first international real estate conference to be organised in the Kingdom which also straddles both the conventional and Shariah-compliant investment sectors. Saudi Arabia is by far the single largest real estate market in the GCC, whether in terms of owners of capital; market size or potential market growth. Mohamed Abdullah Al-Sharif, Secretary General of the Jeddah Chamber of commerce commented that: “ with global oil markets sustaining current levels; all projections indicate that increasing GDP growth rate and levels of private wealth in the Kingdom and Gulf States will maintain an upward momentum in the foreseeable future. Most analysts stress that real estate as an asset class will dominate the investment scene in the Kingdom and the region, including in new areas such as social housing, home financing, and securitization. As such this conference which focuses on the Kingdom of Saudi Arabia, the GCC and international markets could not be more timely”.

Furthermore, according to many bankers the projected magnitude of the capital flows in the GCC and Saudi economy over the next few years is “mind-boggling”. This massive liquidity in the market has also generated huge private wealth which is continuously in search of value added investment opportunities both at home and abroad.

Saudi Arabian and Gulf investors are emerging as some of the top investors in real estate assets in traditional markets such as; the US and UK – For example according to DTZ, Gulf investment in the commercial property market has increased from 4% in 2004 to 11 % last year and this trend is projected to increase over the next few years. In addition, as highlighted by recent transactions, investment savvy GCC investors are exploring new opportunities in emerging new markets such as India; China; Japan and Eastern Europe.

With all these factors in play, this conference aims to leverage these factors and to highlight the role, contribution and importance of the sector to the Saudi economy. At the same time, it aims to explore and inform interested parties about the current state of the real estate market, focussing particularly on the regional markets and those markets which are popular locations of GCC investment such as the US, UK and the EU.

It will consider new market opportunities; future product trends including private equity, REITS and Waqfs; innovations in housing finance; developments in social housing; and the case for real estate insurance. It will also discuss the spectacular emergence of Shariah-compliant real estate investments; and look at the importance of women investors in the Saudi and GCC real estate market.

With growth and opportunities come risks. As such, the conference will explore the various risks associated with real estate investments; legal issues such as regulation, domicile and ownership; and real estate as a function of social inclusion policies. There will also be a panel discussion looking at the way ahead for the sector. The conference also aims to come up with a set of recommendations for the future development and management of the sector. Invited speakers and panellists include regulators, top executives from real estate companies, financial institutions, legal firms, mortgage providers; and others.

Finally, WTO membership, King Abdullah’s accession to the thrown, the wide spectrum of reforms currently underway in the Kingdom, the huge liquidity in the region, and the heightened importance of real estate are, in addition to those factors already mentioned, all key ingredients that present IREF-ME 2006 participants with a great opportunity and platform to establish new relationships and gain direct contact and face to face access to one of the world’s wealthiest and potentially vibrant markets. This is one conference that is not to be missed.


 Related site: http://www.irefme.com/