GCC Markets Suffer Due to Weak Global Environment

By Mohammed Waseem

Investing in the GCC is a good opportunity for foreign investors, be it real estate or the stock market. There are limitations, however and recently the market has been affected quite badly. Property firms and banks in the UAE have been performing badly according to Al Arabiya. However, the risk sentiment has been driving the real estate sector in the UAE.

The underperformance was because of the weak global environment; many leading companies sank and that affected the investors badly. The fall was between 2% and 4% for most companies. Some companies in Saudi Arabia however saw growth even during this downfall. In addition, the central bank chief of Saudi Arabia says that Saudi banks are in a very strong position; they have a capital adequacy ratio of 17.8%, which is way above the minimum specified by Basel standards.

UAE Markets SufferThe central bank of Saudi Arabia is working on maintaining this position and for emphasizing on stability. The country attributed the stability of the market amidst global unrest and turmoil to the balanced monetary policy. The kingdom has also seen an upgraded rating from the rating firm, Fitch Ratings; from an AA- rating, they were upgraded to AA. The kingdom has also been working hard to address other issues including unemployment.

Even though the market is generally weak, Khaleej Times reported that 52% of the UAE residents express confidence in the UAE’s banking system. The conclusion of the survey conducted was that UAE financial institutions are trustworthy enough but they have to do more to convince the rest of the residents to keep their savings onshore. Most of the residents of the UAE are expatriates and they send their earnings back to their countries.

As far as investment in real estate is concerned, UAE court decreed that non-freehold property would be available only for GCC nationals and not all the residents or foreign investors. Freehold property is however available for foreign nationals for investment. In the next article, I will discuss about the freehold property investment in the UAE.

Why You Should Invest in Real Estate

By Joyce Morse for HeadlineFinancial.com

If you are looking at solid investment opportunities, you might want to consider real estate.  While many people have avoided this area because of the housing market devastation, it bears another look.  Real estate can provide one with a great return on investment and a continual income, and it will continue to do so in the future.

Nowhere to Go but Up

Beautiful house, modern house

When the housing market bottomed out, many potential investors looked elsewhere for investment possibilities.  However, real estate works just like any other market; buy low and sell high.  Right now, we are in the buy low time period.  Here are some reasons to look into real estate for your investment portfolio.

  • Mortgage rates are low so you will pay less on interest.
  • More foreclosures mean more renters to allow you to use your property as a rental.
  • Houses are at their lowest prices in years because they have not been increasing in value at the same rate as normal.
  • Tenants often prefer houses to apartments, which means you will have a good selection of renters and be able to find the best tenants.
  • Renters prefer private landlords instead of rental companies, so you will have people competing for your house.

A Long Term Investment

You have to look at real estate as a long term investment, not something you buy today and sell tomorrow.  Even if you buy a property to fix it up and sell it, you will want to have a positive cash flow, and see the value of your investment rise over the long term.

If you buy a house today, it will have a higher value in thirty years, making it a profitable investment.  If you use it as a rental property in the mean time, you will have tenants making your mortgage payments for you so you come out even further ahead.

Tips for Investing in Real Estate

To be successful in the real estate market, here are some tips to follow.

1.  Know the average prices in the market.  This includes what similar houses to the one you are looking at are selling for and what rent is worth on that house.  That way, you will know what you need the mortgage payment to be for the rental income to cover it.

2.  Get an appraisal and an inspection.  The appraisal will show you what the house is worth and an inspection will alert you to any major repairs you will need to do in the near future.

3.  Work with a respected real estate agent to help you make the right decision.  They can explain terms to you and give guidance about the different properties and the surrounding areas.  It is worth the agent’s fee to have a knowledgeable expert to assist you in the process.

Real estate has always been and will continue to be a good investment.  You just have to know what to buy to get a good deal.