Abu Dhabi, Dubai, Cairo and Casablanca are in the best position in the Middle East and North Africa region to attract more long term capital to their real estate markets, according to a new report.
They are destined to perform the best out of 11 cities surveyed in the area by analysts at international property consultants Jones Lang LaSalle as they have the right combination of investment opportunities and competitiveness.
The report, published today (Monday Sept 28), point out that long term investors have been deterred from the Mena region by the short term speculative mentality of both investors and developers.
As a result few sales have occurred recently and a lot of work is needed to create more mature markets, it says.
‘Creating the right environment to attract long term investment into Mena real estate markets remains a work in progress.
While few of the necessary requirements have yet to be fully met, significant progress has certainly been made in many critical areas,’ the report adds.
The last few years saw too much greed and speculation and the need to attract long term, stable investment was ignored.
But now the wholesale withdrawal of speculators and short term investors over the past year due to the global economic crisis offers a chance for positive change.
However, the crisis has also left many property owners needing to hold onto and reposition their assets, some of which they had intended to sell quickly.
On top of this prices and rentals have fallen between 25 and 50%.
Analysts predict that there will be more falls and prices corrections, but at a much slower rate in the rest of 2009.
‘The pace of correction is now easing as global and regional economic stability leads to an improvement in investor sentiment,’ the report says.
It points out that to move ahead the real estate markets need to attract long term regional and global investment.
‘This transition will require a paradigm shift from the previous reliance on short term strategies and rapid implementation to an increased focus on the creation of quality real estate assets that will be attractive to both occupiers and long term property investors,’ it adds.
The key to a successful shift towards a mature real estate market will be private family groups, conglomorates, government entities and institutional investors such as insurance companies, pension funds and listed real estate companies as they bring high volumes of stability and long term capital.
One of the biggest challenges remains oversupply, particularly in Dubai where it is likely to worsen and put further pressure on rents and prices in the short term.
