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Still looking: Investors still prefer hotel and residential assets

Still looking: Investors still prefer hotel and residential assets

70 percent of investors say they are more than likely to expand their portfolios yet it is lack of stock and genuine political risk that are the main impediments

October 4, 2011 2:50 by



Just yesterday we released our exclusive findings with the help from our friends at YouGov Siraj about the not-so-pessimistic attitudes towards buying property here in the Gulf. And while the respondents of our survey included a rather wide sample, Colliers International’s recently released 2011 Global Investor Sentiment Survey provides an interesting insight to the particulars of the major investor’s sentiment in the MENA region.

LOOKING TO INCREASE…

According to the survey around 70 percent of investors in the Middle East reported they were more than likely to look to increase their real estate holdings over the next 12 months, with two-thirds reporting target returns in the region of 15-20 percent. And though this may seem rather positive the bottom line remains that investors are still relatively nervous regarding risk, with half reporting that they did not feel compelled to move up the risk curve at all compared to early 2011. This view is in line with global investors, the majority of whom reported no increased risk appetite.

THE APPETITE

It would appear that there is a genuine appetite for hotel and residential assets above the other asset classes, with residential in Saudi Arabia and hotels in Egypt as the most popular investment targets.

The two key issues which investors said would play a key role in their ability to expand their portfolios: was the supply of “for sale” property and “political risk”. Political concerns stem from great uncertainty in the region regarding the future shape of governments and what impact their decision making may have on the real estate market.

As John Davis, Chief Executive Officer, Colliers International Middle East and North Africa pointed out: “In Egypt we are seeing a lot of cautious prospecting with an intention to buy. While investors wait to see if a change in leadership and supporting government will herald in a new era of stability, their conviction in the country’s long term fundamentals, especially in the tourism sector, will likely drive opportunistic acquisitions of hotel assets.”

BUT IT’S NOT ALL THAT BAD…

Looking at the occupational cycle in the Middle East, the second largest portion of respondents (30 percent) took the view that the market is at around five o’clock, with some minor rental falls still to occur. A further 40 percent stated that they believed that the market had reached the bottom of the cycle, six o’clock, or was showing some minor improvements having reached seven o’clock.

But it is not all too bad: 70 percent of the investors said they believed that the relative value of real estate had improved strongly compared to ten years previously. Which is a significant and…

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