Overactive Gulf real estate market faces ‘perfect storm’
Value of projects at construction stage is four times that of all those completed over previous 10 years
The real estate business in the Arabian Gulf faces a “perfect storm” due to unprecedented construction activity being at odds with the gloomy economic backdrop, a new report has claimed.
The GCC had projects worth $1,653 billion at construction stage as a March 2016, compared to the value of completed projects between August 2001 and March 2016 of just $413 billion, according to data analysed by A.T. Kearney.
The consultancy’s report, ‘A Perfect Storm for Real Estate in the GCC’, said that this threatens the future of the industry.
“We believe the GCC’s real estate sector has entered a perfect storm of trends that could imperil its success. Overcapacity looms on an unprecedented scale,” it said.
“The value of projects already in the construction stage as of March 2016 is four times the value of all projects completed in the previous 10 years, according to an A.T. Kearney analysis of MEED data, and another 10 years’ worth of projects is in the pipeline at earlier stages of development. Each year between 2016 and 2020, this pipeline would deliver anywhere between seven and 12 times the real estate value delivered yearly between 2007 and 2009.”
“As these developments go up, however, the macroeconomic outlook is weakening. Low oil prices have dampened the historically bullish outlook for the GCC… With increasingly finite financial resources and signals of diminishing demand, real estate developers have little choice but to improve how they manage their expanding project portfolios.”
Read A.T. Kearney’s whole report here.
