Abstract
This is the first edition in BMI’s new series of reports on real estate
sectors around the world. We have
sought to incorporate data and insights
from our reports on infrastructure and commercial banking – as
well
as our own forecasts for the economies of the various countries that we
survey.
Key issues – UAE
We suggest that the following are the
key issues to monitor for the real estate sector in the coming year or
so:
• The price movements for house prices in the UAE given the
dramatic move in the last year
would suggest a significant downward
correction is likely. This could put pressure on the real
estate
industry.
• The movement in rental pricing for office space in the
UAE. Again the significant gains in the
last year would also suggest a
downward correction is likely, particularly given the downturn in
the oil
price and therefore the economy in the UAE.
• The impact of any
pressure on the real estate sector flowing through to the banking sector.
Given
the movements in both loan/deposit ratio and the movements in the
domestic lending/nominal
GDP growth, this would suggest the pressures on
the banking sector should be moderate rather
than worrying.
•
Confidence or otherwise of the banks to continue to support the sector.
These conclusions are based on our proprietary Real Estate/Construction
Business Environment Rating
(RECBER), the component factors of which we
discuss in detail. The conclusions are also set against
recent conditions
in the commercial office market – for which we have used office rents in
major cities as
a proxy and in the residential real estate market –
for which we have used housing prices as a proxy.
A major trend throughout
all our real estate reports is that – mainly due to the global financial
crisis,
access to funding will be more important than usual. Accordingly,
we have incorporated overviews of
conditions in the commercial banking
sector – both globally and in the region of each country. We have
also looked at the issues that will drive the fortunes of Real Estate
Investment Trusts (REITs) over the
coming months.
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