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.
The 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.