Middle East Leisure Real Estate Market Booming
With the amount of developments (and cranes!) being launched into the marketplace on an almost daily basis we visited some housebuilders and took time out to attend the second Annual Middle East Leisure Real Estate Symposium in Dubai last week to focus on the outlook for fractional property in the region.
It's clear the leisure real-estate market in the Middle East offers enormous potential for developers and investors due to increasing demand for a wider choice of vacation accommodations in the region. However, tighter regulations are needed to protect consumers and investors who are keen to buy into this market.
The real estate market has shown remarkable growth both globally and regionally in recent years, said Carlos Vogeler, Vice President of Industry Relations for Group RCI. It is the fastest growing world economic sector in terms of foreign exchange, earnings and job creation, and represents 12 percent of international consumer spending.
While it is true that the real estate market can be vulnerable to sudden downturns due to major events such as terrorism or political upheaval, it has always shown a resiliency to bounce back. 'The world is increasingly accepting of uncertainty and turbulence. People are aware of the risks, but it does not keep them from travelling,' Vogeler said.
Nowhere is this more evident than in the Middle East, where the travel market is especially strong due to the region's sunny climate, strong infrastructure, sophisticated tourist attractions and world-class shopping.
The estimated growth rate for travel in the region is projected to be 6.7 percent per year until 2020, compared to 4.1 percent worldwide. Much of the growth will come from the new emerging middle class and an aging population that will have more disposable income, Vogeler said.
Construction in the region is also growing at an astounding rate. Current projects exceed $1 trillion, and in Saudi Arabia alone the value of new projects has doubled to more than $200bn over the next 12 months.
With travel booming in the region and major development projects underway, shared ownership of real estate - where multiple individuals own the right to use a common piece of real-estate for an agreed amount of time - offers enormous potential for developers, operators, and financial institutions in the Middle East, said Peter Giamalva, president and managing director of North Course Advisory Services.
A recent study found that 68 per cent of nationals in the region were keen to buy into shared ownership, which applies to buying fractions of interest in a property, ranging from one month to three months per year, Giamalva said. Overall, Gulf nationals will spend $1.bn annually on shared ownership leisure real estate within the next 12 years.
The mixed-use real estate market is much more segmented now than before, with options including timeshare, fractional ownership, private residence clubs, condo-hotels, cottages and vacation rentals, and destination clubs, said John Paul Nichols, President and Managing Director of Group RCI Europe, Middle East and Africa. Each offers different advantages and risks.
While freehold ownership issues were widely addressed in the Middle East a few years ago, the legal issues relating to shared ownership, are in their early stages and currently remain largely unregulated in the region.
Dubai does not want to attract a bad press for malpractice in the timeshare sector, Peter Shaw of Key & Dixon Legal Consultants warned. 'Whatever the State does there is also the need for self regulation and it is hoped that all fractional operators in Dubai will adhere to a Code of Standards and Ethics.'
Marwan Ahmed bin Ghalita, head of the newly-created Real Estate Regulatory Authority in Dubai, said the emirate's new timeshare law will be published in the next few months. It will focus on ensuring that there is no false advertising, that each project is clearly designated as a fractional, and that fractionals are run by licensed operators.
Also, when customers purchase a fractional, they should receive a title document that clearly states all of the conditions that apply to the agreement, particularly when based around 'ownership rights' he added. The new law would only apply to Dubai, but it is hoped that it would be used as a model for the other emirates.
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