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Dubai, Doha real estate to be biggest hit, says Moody's

MENA FN

The credit crunch and subsequent global recession have taken their toll on the Gulf real estate sector, with local financing from banks no longer available and capital flows into the region on the decline. These factors, together with the resulting negative market sentiment, are the basis of Moody's negative outlook on the region's property sector.



International credit rating agency Moody's believes that the three key themes that will shape the sector during 2009 are access to funding, demand and preservation of cash.

Infancy

In its latest report released on Thursday, Moody's says given that the mortgage industry in the Gulf is still in its infancy, more mature residential markets that have previously relied on an influx of foreign expatriates (Dubai and Doha) are likely to be more negatively impacted than markets that have pent-up demand (Abu Dhabi) or those with traditionally more conservative cash buyers (Saudi Arabia).

Moreover, as the slowdown will increase the number of unemployed expatriates, Moody's expects the population growth figures for those countries that have a high proportion of expatriates (e.g. UAE, Qatar) to become flat or even negative, depending on the severity of the downturn.

It may be mentioned here that according to Standard Chartered Bank's latest report Oman's real estate sector has experienced only a subdued slowdown compared to the rest of the region. Construction projects never experienced the frenzy seen in other parts of the AGCC. Spare capacity and planned units were also limited compared to neighbouring countries. A supply-demand balance in the residential sector is close to being achieved. Prices have risen at a very fast pace in recent years, especially in the capital.

Figures from the Ministry of National Economy still show 16 per cent year-on-year price growth in January 2009. However, the real- state sector represents only about five per cent of Oman's GDP, holding a less prominent position than elsewhere in the region. It, therefore, does not pose the same risks to the broader economy, the report says.

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