Real Estate Market Commentary by zhangyun

VIEWS: 8 PAGES: 7

									                                                  Kuwait Financial Centre “Markaz”
                                                                      MENA REAL ESTATE RESEARCH


Research Highlights:                                                Visa for take -off?
Offering Markaz perspectives on     UAE 3 year property visa extension – in perspective
market developments in MENA
Real Estate.                      News reports in the UAE on official discussions regarding visa related
                                  property market solutions were published during the past weeks
                                  culminating with the latest announcement of extending 3 year multiple
                                  entry visas for property owners, which was reduced to six months
                                  during early 2009. Disclaimers are to be given before we even discuss
                                  this in detail as there appears still lack of clarity in the regulations. One
Markaz Research is available      might have to check the details of the legalities once the regulatory
on:                               structure is finalized. As it appears right now, we understand the below:
Bloomberg - Type “MRKZ” <Go>
Thomson Research,                      All regulations related to the existing 6-month visa remains except
Reuters Knowledge                       that the period has now got extended to 3 years.
Nooz                                   Cost of visa/renewal is AED 2000
Zawya Investor                         Minimum income of investor should be AED 10,000 per month or
ISI Emerging markets                    equivalent, with lack of clarity on the origin country of the source
                                        of income
                                       Property should be purchased for a minimum value of AED 1 Mn.
                                       Visa can be used to sponsor family members.
                                       Not clear if the visa holders can enjoy other residence benefits
                                        such as driving license, bank account etc. Logically, these would
                                        be provided for as well to make sense as is being reported.
                                       Although the near term future does not warrant any, the term can
                                        be reduced again to suit the market conditions.
                                  Thinking of the impact on real estate demand, we can look at the below
                                  sources of demand.
                                  First, foreigners and expatriates seeking second home. Asians account
                                  for 44% of all non UAE nationals registering properties in Dubai as per
                                  publicly available information on transaction statistics, GCC nationals
                                  (28%) and the visa extension would facilitate marginal buyers by the
                                  additional benefit it offers. Citizens of Arab countries account for 4% of
                                  property registrations, however, the instability in some Arab countries
                                  would lead to an increase in the above percentages due to additional
                                  demand from well of second home seeking citizens of those countries
                                  seeking safe alternatives in case of adverse conditions if the situation
                                  worsens. American and European expatriates account for 24% of such
                                  transactions and although these economies not completely out of
Venkat Ramadoss ACA, CFA          woods, we can expect a moderate increase in their demand.
Assistant Manager                 Second, potential entrepreneurs looking for a new venture/business in
+965 2224 8000 ext 1144           UAE. To be able to set up a business, they might have to partner with a
rvenkateshwaran@markaz.com        UAE national. By investing in a property and the accompanies
                                  convenience of the visa would facilitate finding a partner, establish
Bassam N. Al-Othman               network and to better understand the market. Overall, this would be
Executive Vice President          positive for both the real estate sector as well as the business and the
+965 2224 8011                    economy, while all of these factors feed each other in general.
bothman@markaz.com
Kuwait Financial Centre           Third, high skilled employees currently working in UAE. Apart from
“Markaz”                          added comfort to own a house for living as well as for investment, the
                                  visa would facilitate them tide over a period of unemployment in
P.O. Box 23444, Safat 13095,      adverse circumstances and would add to the emotional stability as the
Kuwait                            employee can be sure that he would not be under pressure to find
Tel: +965 2224 8000               another job soon. Although one can find ways to stay with a visit visa,
Fax: +965 2242 5828               this for sure is added convenience. This would be positive for the real
markaz.com                        estate sector.
                                                                    MENA REAL ESTATE RESEARCH

Apart from the above, the 3 year visa would facilitate developers of projects that are still under
construction to persuade the investors to continue to pay the installments that are due to get the
benefits of the visa or with the improved salability perception in the market for their properties once it
is complete. Also, investors with properties with prices marginally lower than AED 1Mn and are looking
to sell would be able to benefit by loading up the price to AED 1 Mn so that the properties qualify for
the extension.

Thinking of property above the threshold values, the question that might arise is, how commonly are
such properties available?? We analyzed the data from propertyfinders’ website and keeping in mind
of the possibility of differences in penetration of internet listing of available properties for sale and the
service provider’s penetration in various markets, we found that 81% of all property listing in Dubai is
listed at or above AED 1 Mn and the number goes up to 86% in Abu Dhabi. We also observed a 5%
increase in number of properties above the threshold for Dubai one day. For Ras Al Khaima it stands at
53% and much less in other emirates of UAE. It is interesting to note that the average price range for
such properties in Dubai are still higher than other emirates (Exhibit-1).

Considering the above, in our opinion, this regulatory move would have higher positive impact for
business, economy and for the society in general with the added job security; while yielding direct and
flow through benefits to the real estate sector as well. Impact on rentals would be limited as the
market is well oversupplied while it can bring in a brief respite stability in the price decline. A trend
reversal in price would not result as the demand from these sources would not be sufficient to
outnumber the supply. Around 15,000 properties are currently listed for sale in Dubai and forthcoming
supply is estimated at c.61,000 units during 2011-13 by Jones Lang Lasalle (JLL). As against this,
transaction statistics indicate an average of 3000 registrations of residential units per quarter, implying
a 2-4 years to absorb the current and forthcoming supply at current rates. Exhibit-2 below indicates a
dismal trend in transactions as low as 1500 transactions per quarter. However, it should be noted that
these are transactions as per the project registration date and not the actual transaction date, thus
taking an average of such transactions would be more appropriate.

For Abu Dhabi, the impact would be similar in terms rentals and in terms of respite in price decline due
to the forthcoming supply. However, the extent of the impact would be lower than Dubai as due to the
general preference of Dubai over Abu Dhabi for second home seekers and entrepreneurs. In terms of
demand and supply, JLL reports that 8,200 new homes were handed over during 2010, while
estimating an additional supply of 61,200 residential units during 2011-13.

Charts and information for reference:

Exhibit-1: Availability and average prices of property listing in UAE




Source: Propertyfinder

Points   to Note:
        More than 80% of all listed properties are above the AED 1 Mn threshold
        Average price of such properties are higher in Dubai than Abu Dhabi
        23% of such listings are priced between AED 1Mn and 1.5 Mn
        We observed a 5% increase in the number of listings > AED 1 Mn for Dubai in one day.



                                                                  Kuwait Financial Centre “Markaz”      2
                                                                MENA REAL ESTATE RESEARCH

Exhibit-2: Dubai residential real estate no. of transactions – proxy for take up




Source: Dubai Land Department, Markaz analysis

Points   to Note:
        Recent transaction trends indicate a dismal market condition
        Chart represents transactions as per registration date and not the transaction date
        Average number of transactions stands at 3,000 per quarter – taking a longer term average

Exhibit-3: Dubai residential real estate transactions value




Source: Dubai Land Department, Markaz analysis

Points to Note:
    Trends in value of transactions closely follow the number of transactions
    Chart represents transactions as per registration date and not the transaction date




                                                              Kuwait Financial Centre “Markaz”   3
                                                                                          MENA REAL ESTATE RESEARCH

      Exhibit-4: Completed residential buildings - Dubai




      Source: Dubai Statistics Centre, Markaz analysis


      Points    to Note:
               We read that c.3500 residential buildings were completed during 2010 from DSC data
               JLL estimates that c.36,000 residential units were completed during 2010
               JLL estimates a supply of c.61,000 units during 2011-13 and 31,000 units during 2011 alone


      Exhibit-5: Dubai land transactions trends – proxy for liquidity




      Source: Dubai Land Department, Markaz analysis

      Points to Note:
          Liquidity continues to remain low compared to pre-crisis bubble heights
          Covers land sale transactions only




Multiple sources are referred and used in this report ranging from news reports, broker research reports, official statistics, websites and
forums etc..


                                                                                       Kuwait Financial Centre “Markaz”              4
                                                                    MENA REAL ESTATE RESEARCH




Disclaimer

This report has been prepared and issued by Kuwait Financial Centre S.A.K (Markaz), which is
regulated by the Central Bank of Kuwait. The report is owned by Markaz and is privileged and
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strategy in any jurisdiction.

The information and statistical data herein have been obtained from sources we believe to be reliable
but no representation or warranty, expressed or implied, is made that such information and data is
accurate or complete, and therefore should not be relied upon as such. Opinions, estimates and
projections in this report constitute the current judgment of the author as of the date of this report.
They do not necessarily reflect the opinion of Markaz and are subject to change without notice. Markaz
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performance is not necessarily indicative of future performance.

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For further information, please contact Markaz at P.O. Box 23444, Safat 13095, Kuwait; Email:
research@markaz.com; Tel: 00965 1804800; Fax: 00965 22450647.



                                                                  Kuwait Financial Centre “Markaz”      5
                                                                                                   Kuwait Financial Centre “Markaz”
                                                                                                                      MENA REAL ESTATE RESEARCH

                                                                   Markaz Research Offerings

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The New Regulations on Kuwait Investment Sector (Jun-10)                                             Infrastructure
The New Regulations on Kuwait Investment Sector (Jun-10)           Daily
Persistence in Performance (Jun-10)                                Markaz Daily Morning Brief        GCC   Power
Kuwait Capital Market Law (Mar-10)                                 Markaz Kuwait Watch               GCC   Ports
What to expect in 2010 (Jan-10)                                    Daily Fixed Income Update         GCC   Water
GCC Banks - Done with Provisions? (Jan-10)                                                           GCC   Airports
What is left for 2009? (Sept-09)                                   Weekly                            GCC   Roads & Railways
Kuwait Investment Sector (Jun-09)                                                                    GCC   ICT
Missing The Rally (Jun-09)                                         KSE Market Weekly Review
Shelter in a Storm (Mar-09)                                        International Market Update       Real Estate – Market Outlook
Diworsification: The GCC Oil Stranglehold (Jan-09)                 Real Estate Market Commentary             Qatar Residential - An Update (Aug-10)
This Too Shall Pass (Jan-09)                                                                                 Dubai Real Estate - Trends and Outlook(Apr-10)
Fishing in Troubled Waters (Dec-08)                                Monthly                                   Egypt Real Estate - Trends and Outlook(Feb-10)
Down and Out: Saudi Stock Outlook (Oct-08)                                                                   Kuwait Real Estate Outlook(Dec-09)
                                                                   Mena Mergers & Acquisitions                Abu Dhabi Residential (Nov-09)
Mr. GCC Market-Manic Depressive (Sept-08)                                                                
Global Investment Themes (June-08)                                 Option Market Activity                    Office Investment in KSA (Jul-09)
                                                                   GCC Quants                                 Saudi Arabia – Residential Real Estate Outlook (Jun-09)
To Yield or Not To Yield (May-08)                                                                        
The Golden Portfolio (Apr-08)                                      Market Review                             Saudi Arabia (Sep-08)
Banking Sweet spots (Apr-08)                                       GCC Corporate Earnings                    Abu Dhabi (July-08)
The “Vicious Square” Monetary Policy options for Kuwait (Feb-08)                                             Algeria (Mar-08)
China and India: Too Much Too Fast (Oct-07)                        Quarterly                                 Jordan (Mar-08)
A Potential USD 140b Industry: Review of Asset Management          GCC Equity Funds                          Kuwait (Feb-08)
Industry in Kuwait (Sep-07)                                        Thought Speaks                            Lebanon (Dec-07)
A Gulf Emerging Portfolio: And Why Not? (Jun-07)                   Equity Research Statistics                Qatar (Sep-07)
To Leap or To Lag: Choices before GCC Regulators (Apr-07)                                                    Saudi Arabia (Jul-07)
Derivatives Market in GCC (Mar-07)                                 Periodic                                  U.S.A. (May-07)
Managing GCC Volatility (Feb-07)                                                                             Syria (Apr-07)
GCC for Fundamentalists (Dec-06)                                   MENA Real Estate Perspectives
GCC Leverage Risk (Nov-06)                                                                           Real Estate Strategic Research

                                                                                                              GCC Distressed Real Estate Opportunities (Sep-09)
                                                                                                              GCC Real Estate Financing (Sept-09)
                                                                                                              Real Estate Earnings -2009 (May-09)
                                                                                                              Supply Adjustments Are we done? (Apr-09)
                                                                                                              Dubai Real Estate Meltdown (Feb-09)
                                                                                                           
                                                                                                                                                                   MENA REAL ESTATE RESEARCH

                                                                            Markaz Research Offerings

                                                                                            Company Research
   Saudi Arabia                                                                       UAE                                         Qatar                                    Oman

      Jabal Omar Development (Jul-10)    Kuwait                                           Dubai Financial Market (Sept-09)          Masraf Al-Rayan (Jun-10)               Shell Oman Marketing (Apr-10)
      Arabian Cement Co. (Jul-10)        (For Internal Use Only)                          ADCB (Jun-09)                             Commercial Bank of Qatar (Mar-10)      Galfar Engineering & Cont. (Nov-08)
      Yanbu Cement Co. (Jun-10)               Qurain Petrochem. Ind. (Aug-10)            DP World (Jun-09)                                                                 Oman Telecommunications (Sept-08)
                                                                                                                                      Qatar Telecom (Jun-09)
      Saudi Telecom Co. (Jun-10)
                                               Wataniya (Jul-10)                          NBAD (Feb-09)                             Industries Qatar (Apr-09)              Bank Muscat(Sept-08)
      Emaar the Economic City (Jun-10)
      Qassim Cement Company (Jun-10)          Boubyan Bank (June-10)                     Sorouh Real Estate (Feb-09)               Qatar National Bank (Feb-09)           Oman cement (Sept-08)
      Savola Group (May-10)                   Agility (June-10)                          Aldar Properties (Feb-09)                 United Development Co. (Feb-09)        Raysut Cement Company (Aug-08)
      Alinma Bank (May-10)                    Gulf Bank of Kuwait (May -10)              Gulf Cement Company (Jan-09)              Qatar Fuel Co. (Dec-08)                National Bank of Oman (Aug-08)
      Jarir Marketing (May-10)                National Bank of Kuwait (Mar-10)           Abu Dhabi National Hotels (Dec-08)        Qatar Shipping Co (Dec-08)             OIB (July-08)
      Bank Al Bilad (May-10)                  Al Deera Holding (Aug-09)                  Dubai Investments (Dec-08)                Barwa Real Estate Co. (Nov-08)
      Bank Al Jazira (Apr-10)                                                                                                                                             Jordan
                                               Kuwait Finance House (Apr-09)              Arabtec Holding (Dec-08)                  Qatar Int’l Islamic bank (Nov-08)
      Makkah Construction (Apr-10)
                                               Kuwait Financial Centre (Dec-08)           Air Arabia ( Nov-08)                      Qatar Insurance Co. (Nov-08)           Arab Bank (Sept-08)
      Saudi Cement Company(Apr-10)
      Southern Province Cement Co(Mar-10)     Commercial Bank of Kuwait (Oct-08)         Union Properties (Nov-08)                 Qatar Gas Transport Co. (Oct-08)       Cairo Amman Bank (Oct-08)
      Saudi Electricity Company(Feb-10)       National Industries Group (Sept-08)        Dubai Islamic bank (Oct-08)               Doha Bank (Aug-08)
      Saudi Arabian Mining Co(Feb-10)         Zain (Sept-08)                             Union National Bank (Aug-08)              QEWC (July-08)                      Morocco
      Yamama Saudi Cement (Feb-10)            Global Investment House (Sept-08)          Emaar Properties (July-08)                QISB (July-08)                        Maroc Telecom (Mar-10)
      Etihad Etisalat (Feb-10)                Kipco (Sept-08)                            Dana Gas (July-08)
      Al Marai Company (Dec-09)                                                                                                  Bahrain                                  Egypt
                                               The Investment Dar (Sept-08)               FGB (July-08)
      Arab National Bank (Oct-09)
                                               Burgan Bank (Sept-08)                      Etisalat (Jun-08)
      SAFCO (Oct-09)                                                                                                                 Gulf Finance House (Oct-08)            Sidi Kerir Petrochemicals (Jul-10)
      Al Rajhi Bank (Aug-09)                  Automated Systems Co (Aug-08)
                                                                                                                                      Esterad Inv. Company (Aug-08)          Egypt Kuwait Holding (Mar-10)
      Riyad Bank (Jul-09)                     Al Safat Investment Co (July-08)
                                                                                                                                      Bahrain Islamic Bank (Aug-08)          Commercial Int’l Bank (Oct-08)
      Saudi Telecom Co. (May-09)
                                                                                                                                      Ithmaar Bank (July-08)                 Orascom Telecom (Sep-08)
      Sabic (Mar-09)
      Samba Financial Group (Feb-09)                                                                                                 Tameer (July-08)                       Mobinil (Sep-08)
      Saudi Investment Bank (Jan-09)                                                                                                 Batelco (July-08)                      Telecom Egypt (Aug-08)
      Kingdom Holding Co. (Dec-08)                                                                                                                                           EFG-Hermes (Jun-08)


                                                                                                                                   Markaz Company Research Coverage
                                                                                                                       MSCI Arabian Markets      MSCI Arabian Markets
Markaz Research is available on: Bloomberg Type “MRKZ” <GO>,                                                              Conventional                  Islamic                                 Local Index
Thomson Financial, Reuters Knowledge, Zawya Investor & Noozz.
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