Economic diversification and Vision 2030 initiatives
The prospective of real estate in the Middle East looks interesting for the coming year, led by several dynamic trends, including economic diversification. Middle Eastern countries, especially Saudi Arabia and the UAE, have introduced programmes aiming to reduce the dependence of their gross domestic product (GDP) on oil revenues and enhancing the region’s global competitiveness. The key element of Saudi Arabia’s Vision 2030 and the UAE’s Economic diversification strategy are large-scale real estate development projects. Mega real estate projects, investment in infrastructure projects and foreign investment opportunities are to foster economic growth, technological innovation, environmental sustainability and social advancement.Real estate investment trusts (REITs) and foreign Investment
Real estate assets have become an attractive and stable investment opportunity in the Middle East. Without direct ownership of real estate projects, investment through Real estate investment trusts (REITs) is gaining popularity. REITs as an investment vehicle has been promoted in the Dubai market as part of broader economic reforms. Transparency and investor confidence is expected through comprehensive legal frameworks in the real estate market.The Middle East countries are putting effort into attracting the attention of international investors in real estate projects. The UAE’s Golden Visa programme provides an opportunity for long-term residency to property investors. Foreign ownership in certain areas and projects has also opened up as part of the Saudi Arabia Vision 2030 reforms. The increased interest from global investors is expected to continue fuelling the real estate market, especially with favourable laws for foreign ownership in places like Dubai and certain areas of Saudi Arabia.
Technological integration
The latest trend in technical integration for investors to invest in real estate projects is through ‘asset tokenisation’. Asset tokenisation is the process of converting rights to a physical or digital asset into a digital token on a blockchain. A Dubai-based developer has signed a deal with a blockchain platform specialising in tokenising real-world assets. This helps to convert ownership rights into digital tokens which can be traded online. These developments highlight the region’s move towards integrating technology into real estate.Luxury real estate market expansion
Luxury real estate is key to the Middle East market and will continue to thrive. With the ongoing rise of the ultra-wealthy population in the popular cities of the Middle East, these cities are becoming increasingly attractive for high-net-worth individuals (HNWIs) and have transformed into luxury lifestyle destinations. In order to respond to the demands of such HNWIs, iconic properties, luxury resorts, private islands and exclusive communities will continue to be in demand. Interest in wellness real estate will also grow, along with luxury living, with developments designed to cater to the health-conscious elite, offering state of art wellness centres, spas and sustainable luxury features.Affordable housing and urbanisation
While the focus on luxury real estate is critical, demand for affordable housing cannot be underestimated. With the surge in the Middle East urban population, affordable residential projects are inevitable. Saudi Arabia’s National Housing Strategy has set a goal of 70% homeownership by 2030, aimed at ensuring that all families can one day own the home of their dreams. For families that need help to achieve homeownership, the programme has established Sakani, which provides personalised housing and financing solutions. This programme encourages the development of affordable housing to meet the growing demand, especially among younger generations and expatriates. UAE’s property market has also seen a rise in more affordable residential projects, and this is expected to continue.Mixed-use projects
The Middle Eastern large cities are facing increased population, long commutes and congested roads. Mixed-use projects, which combine residential, commercial and leisure spaces, are becoming attractive for both investors and users. These projects help to provide a complete eco-system within the community, encouraging the need for green spaces and community building. These projects are set up to address the concerns of long commutes, with an emphasis on walkability or short distance travel.Conclusion
The outlook of real estate in the Middle East is driven by the convergence of technological developments, population demographics, sustainability requirements and economic divergence. The respective governments’ visionary policies are opening up new territories and leading to growth in real estate markets. While there are opportunities for investors and technological advancements in the real estate market, the balance between luxury, affordability and sustainability will be important for setting up vibrant, future-ready cities. With continued trust in the governments and investors, the Middle East’s real estate market has great potential to become one of the most dynamic and innovative globally.How BDO can help
For stakeholders, aligning strategies with these trends can yield attractive returns in the Middle East’s evolving real estate landscape. BDO Real Estate & Construction advisers (REC) offer a wide variety of services to support investors, developers, constructors and clients in any new or on-going projects. Please feel free to reach out to the REC expert in your local BDO firm if you have any queries.Author: Hizbullah Khan, Partner – Assurance Services, BDO UAE.