GCC’s real estate sector is on a recovery path after a tumultuous couple of years, thanks to the governments' economic diversification efforts, a stabilising oil sector, and rising private investments, according to a report.

Over the last 10 years, the region has continued to witness rapid economic development and demographic changes fueled by a ballooning expat population, which currently stands at 50 per cent of the GCC population, said a report compiled by Al Masah Capital, a privately-owned investment manager.

This, stated the report, has subsequently resulted in an increase in the demand for residential units across the GCC region. And in response to the demand, the UAE on its part has already started its expansive affordable residential construction project to accommodate as many as 385,000 expatriate workers.

Regardless of the yield compression in the UAE’s residential market and decreasing transaction values from the previous years, the UAE’s real estate sector is maturing and is poised for growth in the longer term given the improving regulations, solid macroeconomic fundamentals and highly developed infrastructure.

The report also indicates that the region is now positioned as a preferred destination for global investors with its real estate sector establishing itself as a key barometer for the region’s economic growth.

The rise in per capita income has also been attributed to the sector’s continued stability, the report indicated.

Al Masah Capital said the region’s tourism sector was poised to further accelerate the real estate market in the GCC, especially for the UAE.

On its part, UAE’s real estate market and the construction sector have also been a growth trajectory collectively accounting for 15 percent of its total GDP in 2016, with individual contribution of six percent and nine percent, respectively.

This, the report also indicated, is mainly due to efforts by the Abu Dhabi and Dubai governments aimed at reducing the oil dependency, improving the economy, and favorable policy decision.

Increased Foreign Direct Investment (FDI) has also been singled out as having a positive impact on the sector’s growth.

According to the report, UAE’s FDI nearly doubled from Dh55.3 billion in 2010 to Dh103.1 billion in 2015 with the Foreign Portfolio Investments (FPI), which is still recovering from the 2009 economic slowdown, reaching Dh7.7 billion in 2015.

On the office sector, the report said it outperformed other GCC markets registering a CAGR of 4.5 per cent during 2012-17. On its part, Saudi Arabia has also witnessed steady growth since 2012 with supply reaching 4.9 million sq m in 2017.

Currently, Dubai still maintains the lowest office vacancy rate in the GCC at only 8 per cent as of 2017. But on the other hand, Dubai is still considered as the most favorable commercial destination albeit it being the costliest. It is closely followed by Saudi Arabia.

On their part, the UAE and Saudi Arabia governments have also been proactively promoting affordable housing plans for both locals and expats, it added.-TradeArabia News Service