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Gulf Property Remains ‘Outlier’, Telcos Negative: Moody’s
The property sector will remain an “outlier” and under-perform in the Gulf, says Moody’s Investors Service, in an analysis of some of the key sectors in the region.
“Our outlook for the property industry remains negative due to persistent oversupply in key markets in the GCC,” said Moody’s in a note. “The excess supply of commercial and, to a lesser extent, residential property reflects excessively high growth projections made before the global financial crisis.”
While that does not come as a surprise, Moody’s is not positive on the telecom sector either, suggesting competitive pressures in core markets are hurting profits of major companies.
Both the sectors will also be hurt by the regional turmoil. “We maintain our view that markets in the GCC will continue to stabilise, although issuers with a more pronounced geographical exposure to troubled MENA countries – such as telecoms and selected real estate players (e.g. Emaar) – could be impacted by political instability there.”
The recovery could take as much as two to three years, “if not longer for Dubai commercial office space, before the still vast overcapacities are fully absorbed.”
Residential and commercial real estate in Dubai, Abu Dhabi and Bahrain are worst hit, although Saudi Arabia paints a slightly different picture due to latent demand.
“While this pent-up demand has been visible for many years, a lack of funding combined with a shortage of affordable housing has constrained growth in the market. However, this could change with a new law on mortgage financing by the Saudi Arabian Shura Council.”
Moody’s analysis is mostly in line with a Jones Lang La Salle report which recently surveyed MENA based institutional real estate investors.