Bricks and mortar are the Middle East's safest bets with hotels and residential homes likely to bring the most stable returns, according to investors surveyed for a report on global investment released today.
The Global Investor Sentiment Survey from property consultancy Colliers International takes the pulse of investors worldwide and measures their appetite for risk, areas of interest and key concerns.
Some 70 per cent of investors said they were likely increase their real estate holdings in the Middle East over the next 12 months, with two-thirds reporting target returns in the region of 15 to 20 per cent.
Egyptian hotels are named one of the region's most popular investment targets, as are residential assets in Saudi Arabia.
“In Egypt we are seeing a lot of cautious prospecting with an intention to buy. While investors wait to see if a change in leadership and supporting government will herald in a new era of stability, their conviction in the country’s long term fundamentals, especially in the tourism sector, will likely drive opportunistic acquisitions of hotel assets,” said John Davis, chief executive for Colliers International Middle East and North Africa.
But investors said a lack of finance was causing problems, with 60 per cent of those surveyed in the Middle East saying financing costs had shown no change since early 2011. Even when looking for finance for fully occupied prime office buildings on long leases, banks showed a great deal of nervousness and risk aversion, some respondents complained.
The appetite for risk has increased little since the start of the year, with half reporting they did not feel compelled to move up the risk curve from early 2011.
This view is in line with global investors, the majority of whom reported no increase in willingness to take chances.
Collier's report added that 70 per cent of investors believed the relative value of real estate in the Middle East had increased strongly when compared to 10 years before.
"Strong increases in output and growing populations in the region [make] real estate a fundamentally more important asset within their economies," it concluded.