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Real estate: Wishful thinking continues in the Gulf

Sentiment in Gulf property is picking up but a truly sustainable recovery is impossible.

With Dubai’s debt restructuring approaching completion, the question is tentatively being asked whether the worst is over for the Gulf’s previously red-hot property market. In most cases, that is wishful thinking.

As other opportunities for investment thin around the world, it could be that stage of the market cycle where oil prices spike. Back in the Middle East, according to a recent report by Saudi Arabia’s NCB Capital, "a turnaround in real-estate prospects now appears imminent across the GCC region".

Even in Dubai, residents are returning from neighbouring emirates, where they had been forced to move because prices in Dubai were too high. According to NCB, mortgage volumes are back to pre-crisis levels, with rates having halved. In Kuwait, sales volumes and values have shown small increases.

But oversupply continues to plague the region, especially in office space. In markets such as Bahrain, hundreds of thousands of units are being completed, at the same time as businesses remain hesitant or simply unable to set up even small operations in the Kingdom.

Government infrastructure spending in markets such as Kuwait might provide alternative revenue opportunities for some builders. But the off-plan sales model is dead in the Gulf and developers still find funding from banks to be scarce.

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