Dubai is the most preferred real estate investment market in the region as it features the greatest number of investment friendly demand drivers, a report said.

Dubai is also competitive regionally in terms of stable political situation, developed infrastructure and market transparency, added the 2012 Mena Real Estate Investor Sentiment Survey, published by Jones Lang LaSalle, a leading real estate investment and advisory firm.

Along with Dubai’s improving economic fundamentals and property prices/rental values, the Emirate has the highest number of investment grade properties in the region, the study pointed out.

With real estate providing a more attractive risk/return ratio than alternative investments, many regional investors are disposing their non-core assets as they look for assets offering stable long term returns, the report said.

While real estate remains a popular asset class for Middle Eastern investors, a more strategic approach is being adopted by them as they seek to rebalance their investment portfolios.

Gaurav Shivpuri, head of Mena Capital Markets at Jones Lang LaSalle, said: “It is noteworthy to see this increasingly strategic route being taken by Mena investors as this is a shift from ‘high capital growth focused land ownership approach’ that has historically prevailed.

“The survey also indicates that investors are willing to pay more for well-located assets with good security of income, as compared to last year. We estimate that this ‘compression of yields’ should help in reducing the bid-ask spreads, promulgating more transactions in the market place.”

The report added that while land bank holdings remain important, the focus is switching to income-producing products that offer long-term stable revenue streams.

The Mena real estate market continues to be dominated by private individuals and family groups rather than the large ‘institutional’ investors that dominate more mature western markets. This trend is expected to continue over coming years, the report said.

The study found that residential assets are considered the most attractive, with interest in this segment particularly strong among private investors.

As uncertainty remains in the market, investors are reluctant to invest large amounts of equity in single deals and are also wary of incurring excessive debt. This is resulting in a preference for relatively small lot sizes, with fewer investors chasing large deals, the study said.

As the markets are becoming increasingly polarised, location emerges as the most influential factor for investors. Risk-related factors such as security of income and political stability also remain at the forefront of investment decisions.

Sustainability remains a very new concept for Middle Eastern investors, with most not willing to pay more for sustainable buildings, the study said.

Craig Plumb, head of Mena Research for Jones Lang LaSalle, said: “At a macro level the Mena real estate market is more optimistic this year, buoyed by continued high oil prices, improving economic performance and greater stability.”

“However little money is flowing into real estate from players outside the region and the investment market continues to be dominated by locally based players. Middle Eastern investors remain major players on the global real estate stage, accounting for a total of $5.3 billion of real estate transactions outside of the region during the first nine months of 2012,” he concluded. – TradeArabia News Service