With Expats Leaving Due to COVID-19, How Is the GCC Real Estate Market Doing?

Published July 23rd, 2020 - 03:00 GMT
With Expats Leaving Due to COVID-19, How Is the GCC Real Estate Market Doing?
Different sectors are reacting differently to the unmatched reality created by the pandemic. (Shutterstock: S-F)

While investing in times of uncertainty might sound like a "smart" attempt to seize a golden opportunity, the bigger the amount of money you need to put into an investment, the harder and more critical the decision becomes.

Despite a slow yet continuous return of most businesses after several months of lockdown, we can hardly claim that economic activities are resuming "as usual" or even expected to recover soon in any part of the world, including the Gulf region.

However, different sectors are reacting differently to the unmatched reality created by the pandemic, with many pointing at possibilities and being hopeful of an approaching growth, when and if the right measures are considered by the stakeholders.

Consequently, it's only natural for the real estate sector to suffer acute outcomes following the surprising halt of all activities last March, as the world imposed strict measures to contain the Coronavirus outbreak.

The drastic drop in demand pressured by the fact that thousands of expatriates had to leave GCC countries after losing their jobs due to the pandemic, has left the rental market at a huge loss, one that majorly slashed rates. Additionally, the looming uncertainty is overwhelming investment-related decisions, as people fear contracting income or sudden job losses.

While Emirati officials haven't released any figures explaining the scale of expat exists the country since the COVID-19 crisis, Oxford Economics estimates that the country most reliant on expats amongst GCC nations "could lose 900,000 jobs."

According to a recent report by UAE-based property portal Bayut, the country has witnessed an average of 1% - 6% decline in both the sales and rental markets in Abu Dhabi's most popular neighborhoods.

The report also noted that upscale neighborhoods in the Emirati capital attracted the biggest number of inquires by investors hopeful to score remarkable deals for competitive prices, such as Al Reem Island, Al Raha Beach, Saadiyat Island, and Yas Island.

Recently, Knight Frank released a detailed report on how the Emirati real estate scene has been affected, in which it revealed that Abu Dhabi’s "residential sales prices fell on average by 8.0% in the year by May 2020," while rental rates "softened by 4.7% in the 12-months by May 2020."

According to the Saudi ministry of interior, at least 300k expats have left the kingdom by mid-2020, with experts expecting the number to climb up to 1 m people by the end of the year.

Last month, JLL reported a 2% decline in rental unit prices in Riyadh, in addition to a 6% drop of sales prices compared to the same period of 2019.

In Kuwait, more than 158k foreign workers have left the country since COVID-19 last March, according to Gulf News.

According to a June report published by the Kuwaiti daily newspaper, Alqabas, real estate investments in Kuwait have fell by an average ranging between 20% - 30% over the last few months, due to COVID-19 expat "migrations."

Soon, increasingly affordable properties, in addition to reduced service fees, convenient interest rates, and encouraging loan to value ratio will all be factors that suggest an upcoming GCC real estate boom, as soon as the pandemic is announced under control, making purchasing realty now a worthy risk.

Numbers hinting at a spike in real estate popularity in the region are supported by promising news of successful vaccine trials in the UK and Russia. Once a vaccine is proved and guaranteed for people everywhere, most businesses are expected to thrive and recruit more and more people again, which will eventually bring expats back to the region.

Would you consider investing your money in real estate in a GCC country nowadays, making use of low mortgage rates and softer prices?


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