mena real estate market commentary 27122011

12
Kuwait Financial Centre “Markaz” MENA REAL ESTATE RESEARCH Real Estate Market Commentary 18-Dec-11 to 24-Dec-11 Kuwait: In its Q3-11 report, Kuwait Finance House reported a c. 5% average price growth across governorates in the investment properties segment (apartments); a stable price trend in commercial properties and c.3% growth in industrial property prices on a Q-o-Q basis. It also indicated 90%-95% occupancy for investment properties and reported stable rents across segments on a Q-o-Q basis. (Refer Charts 3 & 4). Saudi Arabia: JLL, in its Q3-11 report on Riyadh real estate market, reported that c.6,000 residential units were supplied during Q3-11 which were mostly absorbed and it estimated the total residential stock at c.876,000 units. JLL reported a 4% Q-o-Q growth in villa prices and 1% Q-o-Q growth in apartment prices during Q3-11 and suggested the preference for villas in end-user financing to be the cause of lower growth in apartment prices. The report also indicated that villa rentals grew by 2.7% and apartment rentals grew by 2.6% during Q3-11. While JLL had been reporting a shortage of residential compounds for expatriates during past several quarters, it suggested more supply of apartments forthcoming in this segment (2,000 units by 2013), thus signaling gradually diminishing opportunities. JLL residential supply – Q3-Q1-11 estimate comparison No of units („000s) 2011 2012 2013 2014 2015 Q3-11 Est. Completed stock 876 882 912 941 973 Future supply 6 29 30 31 36 Q1-11 Est. Completed stock 858 882 910 NA NA Future supply 24 28 29 NA NA On the office space front, JLL reported a supply of 20,000 sqm of office space during Q3-11 and estimated the total office stock in Riyadh at c.3 Mn Sqm with an addition of 11,000 sqm during Q4-11. JLL lowered its estimates for the forthcoming supply for 2012 and 2013 marginally by c.100k sqm to 818,000 sqm, implying an addition of 25% to the existing stock. It reported an annual take up of 200,000 sqm and indicated that the supply would be eventually absorbed over time. However, even if we assume that the take up would remain at such high levels, which is not highly likely, it would take a minimum of 4 years to absorb this supply. JLL reported Grade A office rentals to have grown by 13% Y-o-Y to SAR 1,400/Sqm in Q3-11 driven by supply of higher quality space and expected the supply to attract occupants of lower quality buildings. Grade B rents reportedly remained stable at c. SAR 1000/Sqm and vacancy levels was reported at 12% city-wide and 16% for CBD during Q3-11. Bahrain: Cluttons reportedly indicated that Bahrain would witness an oversupply of office space as 100,000 Sqm of office space was added in 2011 and 60,000 Sqm is expected to be completed during 2012. It also reportedly estimated the current occupancy rates at about 60–70% of total stock (850,000 Sqm), compared to 85–90% occupancy rates in 2009, and over 90% in 2007. On the residential front, Cluttons reportedly expected flat to declining trends in rental rates depending on the location. Research Highlights: A weekly market commentary Contents Market Commentary Charts to Note Activity Monitor: Dubai, Kuwait, Riyadh - KSA, Dammam – KSA Qatar Markaz Research is available on: Bloomberg - Type “MRKZ” <Go> Thomson Research, Reuters Knowledge ReutersRealEstate.com Nooz Zawya Investor ISI Emerging markets Venkat Ramadoss ACA, CFA Assistant Manager +965 2224 8548 [email protected] Bassam N. Al-Othman Executive Vice President +965 2224 8011 [email protected] M.R. Raghu CFA, FRM Head of Research +965 2224 8280 [email protected] Kuwait Financial Centre “Markaz” P.O. Box 23444, Safat 13095, Kuwait Tel: +965 2224 8000 Fax: +965 2242 5828 markaz.com Developments sourced from various sources including news portals like Gulfbase, Zawya, Reuters, Bloomberg, Trade Arabia, Business 24/7, Arabian Business, The Peninsula, Gulf News, Property wire, Khaleej Times, Saudi Gazette, KUNA etc and also from published reports of real estate brokers and investment research houses.

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Page 1: MENA Real Estate Market Commentary 27122011

Kuwait Financial Centre “Markaz” MENA REAL ESTATE RESEARCH

Real Estate Market Commentary 18-Dec-11 to 24-Dec-11

Kuwait: In its Q3-11 report, Kuwait Finance House reported a c. 5% average price growth across governorates in the investment properties

segment (apartments); a stable price trend in commercial properties and c.3% growth in industrial property prices on a Q-o-Q basis. It also

indicated 90%-95% occupancy for investment properties and reported

stable rents across segments on a Q-o-Q basis. (Refer Charts 3 & 4).

Saudi Arabia: JLL, in its Q3-11 report on Riyadh real estate market,

reported that c.6,000 residential units were supplied during Q3-11 which were mostly absorbed and it estimated the total residential stock at

c.876,000 units. JLL reported a 4% Q-o-Q growth in villa prices and 1%

Q-o-Q growth in apartment prices during Q3-11 and suggested the preference for villas in end-user financing to be the cause of lower

growth in apartment prices. The report also indicated that villa rentals grew by 2.7% and apartment rentals grew by 2.6% during Q3-11. While

JLL had been reporting a shortage of residential compounds for expatriates during past several quarters, it suggested more supply of

apartments forthcoming in this segment (2,000 units by 2013), thus

signaling gradually diminishing opportunities.

JLL residential supply – Q3-Q1-11 estimate comparison

No of units

(„000s) 2011 2012 2013 2014 2015

Q3-11

Est.

Completed stock 876 882 912 941 973

Future supply 6 29 30 31 36

Q1-11

Est.

Completed stock 858 882 910 NA NA

Future supply 24 28 29 NA NA

On the office space front, JLL reported a supply of 20,000 sqm of office space during Q3-11 and estimated the total office stock in Riyadh at c.3

Mn Sqm with an addition of 11,000 sqm during Q4-11. JLL lowered its estimates for the forthcoming supply for 2012 and 2013 marginally by

c.100k sqm to 818,000 sqm, implying an addition of 25% to the existing

stock. It reported an annual take up of 200,000 sqm and indicated that the supply would be eventually absorbed over time. However, even if

we assume that the take up would remain at such high levels, which is not highly likely, it would take a minimum of 4 years to absorb this

supply.

JLL reported Grade A office rentals to have grown by 13% Y-o-Y to SAR 1,400/Sqm in Q3-11 driven by supply of higher quality space and

expected the supply to attract occupants of lower quality buildings. Grade B rents reportedly remained stable at c. SAR 1000/Sqm and

vacancy levels was reported at 12% city-wide and 16% for CBD during Q3-11.

Bahrain: Cluttons reportedly indicated that Bahrain would witness an

oversupply of office space as 100,000 Sqm of office space was added in 2011 and 60,000 Sqm is expected to be completed during 2012. It also

reportedly estimated the current occupancy rates at about 60–70% of total stock (850,000 Sqm), compared to 85–90% occupancy rates in

2009, and over 90% in 2007. On the residential front, Cluttons

reportedly expected flat to declining trends in rental rates depending on the location.

Research Highlights: A weekly market commentary

Contents Market Commentary

Charts to Note

Activity Monitor: Dubai,

Kuwait,

Riyadh - KSA,

Dammam – KSA

Qatar

Markaz Research is available on:

Bloomberg - Type “MRKZ” <Go>

Thomson Research, Reuters Knowledge

ReutersRealEstate.com Nooz

Zawya Investor

ISI Emerging markets

Venkat Ramadoss ACA, CFA

Assistant Manager +965 2224 8548

[email protected]

Bassam N. Al-Othman

Executive Vice President +965 2224 8011

[email protected]

M.R. Raghu CFA, FRM Head of Research

+965 2224 8280

[email protected]

Kuwait Financial Centre “Markaz”

P.O. Box 23444, Safat 13095,

Kuwait Tel: +965 2224 8000

Fax: +965 2242 5828

markaz.com

Developments sourced from various sources including news portals like Gulfbase, Zawya, Reuters, Bloomberg, Trade Arabia, Business 24/7, Arabian Business, The Peninsula, Gulf News, Property wire, Khaleej Times, Saudi Gazette, KUNA etc and also from published reports of real estate brokers and investment research houses.

Page 2: MENA Real Estate Market Commentary 27122011

MENA REAL ESTATE RESEARCH

Kuwait Financial Centre “Markaz” 2

Charts to note: Chart 1: Qatar –CPI & rental inflation

Source: Qatar Statistics Authority *RFE: Rent, fuel & energy

Chart 2: Kuwait CPI & rental inflation

Source: Central Statistics Office, Kuwait

-3.4%

0.4%

1.5%1.8% 1.7% 1.5% 1.8% 1.8% 2.0% 2.1% 2.2% 2.4% 2.1%

-7.0%-6.7%

-5.4%-5.7%

-5.1%-4.5%

-3.8%-4.4%

-3.5%-3.6%

-4.3%

-5.8%-5.7%

-8%

-6%

-4%

-2%

0%

2%

4%

Nov 2010

Dec 2010

Jan 2011

Feb 2011

Mar 2011

April 2011

May 2011

June 2011

July 2011

Aug 2011

Sept 2011

Oct 2011

Nov 2011

CPI Inflation RFE Inflation *

0%

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2%

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7%

Oct 2010

Nov 2010

Dec 2010

Jan 2011

Feb 2011

Mar 2011

April 2011

May 2011

June 2011

July 2011

Aug 2011

Sept 2011

Oct 2011

CPI House Rent

Page 3: MENA Real Estate Market Commentary 27122011

MENA REAL ESTATE RESEARCH

Kuwait Financial Centre “Markaz” 3

Chart 3: Apartment rental trends in Kuwait – Capital and Hawalli

Source: Kuwait Finance House, Markaz analysis Note: 2BBHKM – 2 Bed-Bath-Hall-Kitchen-Maid room

Chart 4: Apartment rental trends in Kuwait – Other governorates

Source: Kuwait Finance House, Markaz analysis Note: 2BBHKM – 2 Bed-Bath-Hall-Kitchen-Maid room

Page 4: MENA Real Estate Market Commentary 27122011

MENA REAL ESTATE RESEARCH

Kuwait Financial Centre “Markaz” 4

Activity monitor

Dubai Real Estate Transactions (2011)

Transactions W-o-W Y-o-Y

Apartment No. 76.9% 294.6%

Value 40.5% 288.8%

Villa No. 23.1% 33.3%

Value 29.3% 58.5%

Land No. -23.2% 38.7%

Value -34.9% -7.6%

Total No. 59.3% 230.6%

Value 6.4% 100.6%

Land Transactions

Villa Transactions

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Page 5: MENA Real Estate Market Commentary 27122011

MENA REAL ESTATE RESEARCH

Kuwait Financial Centre “Markaz” 5

Apartment Transactions

Source: Dubai Land Department Note: 1) The above table/chart represents transactions as per the registration date and not the transaction date

2) Outliers identified are removed for better clarity.

Kuwait Real Estate Transactions (2011)

Transactions W-o-W Y-o-Y

Private Residential

No. 5.1% 6.0%

Value 5.9% -1.4%

Investment No. -43.8% -28.0%

Value 12.0% -9.2%

Commercial No. N.A. N.A.

Value N.A. N.A.

Total No. -5.3% 0.0%

Value 7.9% -4.3%

Private Residential Property transactions

Source: MOJ, Kuwait

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Page 6: MENA Real Estate Market Commentary 27122011

MENA REAL ESTATE RESEARCH

Kuwait Financial Centre “Markaz” 6

Investment Property transactions

Source: MOJ, Kuwait

KSA Real Estate Transactions (2011)

Riyadh Real Estate Transactions

Transactions W-o-W Y-o-Y

Residential Space 23.1% -93.7%

Value 1.5% -48.2%

Commercial Space 146.0% -46.9%

Value 132.4% 32.3%

Total Space 68.6% -88.0%

Value 50.9% -19.8%

Riyadh – Residential transactions

Source: MOJ

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Page 7: MENA Real Estate Market Commentary 27122011

MENA REAL ESTATE RESEARCH

Kuwait Financial Centre “Markaz” 7

Riyadh – Commercial transactions

Source: MOJ

Dammam Real Estate Transactions

Transactions W-o-W Y-o-Y

Residential Space 69.9% -6.9%

Value 75.2% 42.5%

Commercial Space -37.4% -90.9%

Value -37.6% -41.8%

Total Space -2.9% -81.5%

Value 22.2% 5.7%

Dammam – Residential transactions

Source: MOJ

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Page 8: MENA Real Estate Market Commentary 27122011

MENA REAL ESTATE RESEARCH

Kuwait Financial Centre “Markaz” 8

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0W

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2W

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3W

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4W

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5W

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8W

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9W

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1W

eek 3

2W

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3W

eek 3

4W

eek 3

6W

eek 3

8W

eek 4

0W

eek 4

1W

eek 4

2W

eek 4

3W

eek 4

4W

eek 4

7W

eek 4

8W

eek 4

9 Va

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Tra

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No

. o

f T

ra

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No. of transactions Value transacted (QAR Mn)

Page 9: MENA Real Estate Market Commentary 27122011

MENA REAL ESTATE RESEARCH

Kuwait Financial Centre “Markaz” 9

Disclaimer

This report has been prepared and issued by Kuwait Financial Centre S.A.K (Markaz) and its subsidiaries. Markaz is regulated by the Capital Markets Authority and the Central Bank of Kuwait. The

report is owned by Markaz and its subsidiaries and is privileged and proprietary and is subject to copyrights. Sale of any copies of this report is strictly prohibited. This report cannot be quoted without

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construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy in any jurisdiction.

The information and statistical data herein have been obtained from sources we believe to be reliable

but no representation or warranty, expressed or implied, is made that such information and data is

accurate or complete, and therefore should not be relied upon as such. Opinions, estimates and projections in this report constitute the current judgment of the author as of the date of this report.

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realized. Investors should note that income from such securities, if any, may fluctuate and that each security‟s price or value may rise or fall. Investors should be able and willing to accept a total or partial

loss of their investment. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily indicative of future performance.

Kuwait Financial Centre S.A.K (Markaz) and its subsidiaries may seek to do business, including investment banking deals, with companies covered in its research reports. As a result, investors should

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Page 10: MENA Real Estate Market Commentary 27122011

Kuwait Financial Centre “Markaz” MENA REAL ESTATE RESEARCH

Economics

MENA Unrest (Apr-11) Kuwait Development Plan (Mar-11) Kuwait Investment Sector (Sept-10) The New Regulations on Kuwait Investment Sector (Jun-10) Kuwait Capital Market Law (Mar-10) The “Vicious Square” Monetary Policy options for Kuwait (Feb-08) To Leap or To Lag: Choices before GCC Regulators (Apr-07) GCC for Fundamentalists (Dec-06)

GCC Leverage Risk (Nov-06)

Sectors

Infrastructure GCC Power (2011) GCC Airports (2011) GCC Ports (2011) GCC Water (2011) GCC Roads & Railways (2011) GCC ICT (2011)

MENA Real Estate MENA Market Outlook

Kuwait KSA Abu Dhabi Dubai Qatar Egypt Lebanon Jordan Syria Algeria Periodic Research Real Estate Strategic Research MENA Real Estate Perspectives Weekly Real Estate Market Commentary

International Real Estate

Market Outlook U.S.A.

Banking

Stress Testing Kuwait Banks (May-11) GCC Banks - Done with Provisions? (Jan-10) Shelter in a Storm (Mar-09) Banking Sweet spots (Apr-08)

Oil & Gas Diworsification: The GCC Oil Stranglehold (Jan-09) Monthly Regional Petroleum Projects Commentary Daily Oil & Gas Bulletin

Strategic Research KSE 15 Index (Sept-11) How is the GCC preparing for a AA+ World? (Sept-11) GCC Outlook 2H11 (Aug-11) What to expect in 2011 (Jan-11) The Golden Portfolio (Sept-10) Persistence in Performance (Jun-10) What to expect in 2010 (Jan-10) What is left for 2009? (Sept-09) Missing the Rally (Jun-09) This Too Shall Pass (Jan-09) Fishing in Troubled Waters (Dec-08) Down and Out: Saudi Stock Outlook (Oct-08) Mr. GCC Market-Manic Depressive (Sept-08) Global Investment Themes (June-08) To Yield or Not To Yield (May-08) China and India: Too Much Too Fast (Oct-07) A Potential USD 140b Industry: Review of Asset Management Industry in Kuwait (Sep-07) A Gulf Emerging Portfolio: And Why Not? (Jun-07) Derivatives Market in GCC (Mar-07) Managing GCC Volatility (Feb-07)

Periodic Research Annual GCC Market Outlook Quarterly Thought Speaks GCC Equity Funds GCC Corporate Earnings GCC Equity Research Statistics Monthly Market Review Weekly MENA Market Intelligence KSE Market Review International Market Update Daily Markaz Daily Morning Brief Markaz Kuwait Watch Daily Fixed Income Update

Company Research (See the list attached)

Capital Markets

Markaz Research Offerings

Page 11: MENA Real Estate Market Commentary 27122011

MENA REAL ESTATE RESEARCH

Bahrain Batelco (Aug-10) Al Salam Bank (Aug-10) Gulf Finance House (Oct-08) Esterad Inv. Company (Aug-08) Bahrain Islamic Bank (Aug-08) Ithmaar Bank (July-08) Tameer (July-08)

Qatar Qatar National Bank (Oct-10) Qatar Gas Transport Co. (Sept-10) QISB (Sept-10) Masraf Al-Rayan (Jun-10) Commercial Bank of Qatar (Mar-10) Qatar Telecom (Jun-09) Industries Qatar (Apr-09) United Development Co. (Feb-09) Qatar Fuel Co. (Dec-08) Qatar Shipping Co (Dec-08) Barwa Real Estate Co. (Nov-08) Qatar Int‟l Islamic bank (Nov-08) Qatar Insurance Co. (Nov-08) Doha Bank (Aug-08) QEWC (July-08)

UAE NBAD (Mar-11) Union National Bank (Sept-10) FGB (Aug-10) Etisalat (Aug-10) Dubai Financial Market (Sept-09) ADCB (Jun-09) DP World (Jun-09) Sorouh Real Estate (Feb-09) Aldar Properties (Feb-09) Gulf Cement Company (Jan-09) Abu Dhabi National Hotels (Dec-08) Dubai Investments (Dec-08) Arabtec Holding (Dec-08) Air Arabia ( Nov-08) Union Properties (Nov-08) Dubai Islamic bank (Oct-08) Emaar Properties (July-08) Dana Gas (July-08)

Oman Bank Muscat (Mar-11) Raysut Cement Company (Sept-10) Shell Oman Marketing (Apr-10) Galfar Engineering & Cont. (Nov-08) Oman Telecommunications (Sept-08) Bank Muscat(Sept-08) Oman cement (Sept-08) National Bank of Oman (Aug-08) OIB (July-08)

Egypt Sidi Kerir Petrochemicals (Jul-10) Egypt Kuwait Holding (Mar-10) Commercial Int‟l Bank (Oct-08) Orascom Telecom (Sep-08) Mobinil (Sep-08) Telecom Egypt (Aug-08) EFG-Hermes (Jun-08)

Jordan Arab Bank (Sept-08) Cairo Amman Bank (Oct-08) Morocco Maroc Telecom (Mar-10)

Saudi Arabia Al Rajhi bank (Mar-11)

Saudi Telecom Co. (Feb-11)

Samba Financial Group (Aug-10) Jabal Omar Development (Jul-10)

Arabian Cement Co (Jul-10)

Yanbu Cement Co. (Jun-10) Emaar Economic City (Jun-10)

Qassim Cement Company (Jun-10)

Savola Group (May-10) Alinma Bank (May-10)

Jarir Marketing (May-10) Bank Al Bilad (May-10)

Bank Al Jazira (Apr-10)

Makkah Construction (Apr-10) Saudi Cement Company(Apr-10)

Southern Province Cement Co(Mar-10)

Saudi Electricity Company(Feb-10) Saudi Arabian Mining Co(Feb-10)

Yamama Saudi Cement (Feb-10)

Etihad Etisalat (Feb-10) Al Marai Company (Dec-09)

Arab National Bank (Oct-09)

SAFCO (Oct-09) Al Rajhi Bank (Aug-09)

Riyad Bank (Jul-09) Sabic (Mar-09)

Saudi Investment Bank (Jan-09)

Kingdom Holding Co (Dec-08) Saudi Kayan Petro Co. (Aug-08)

Banque Saudi Fransi (Jun-08)

Company Research

Markaz Research is available on: Bloomberg Type “MRKZ” <GO>,

Thomson Financial, Reuters Knowledge, Zawya Investor & Noozz. To obtain a print copy, kindly contact:

Kuwait Financial Centre “Markaz” Media and Communications Department

Tel: +965 2224 8000 Ext. 1814 Fax: +965 2249 8740

Postal Address: P.O. Box 23444, Safat, 13095, State of Kuwait

Email: [email protected] markaz.com/research

Kuwait (For Internal Use Only)

Qurain Petrochem. Ind. (Aug-10) Wataniya (Jul-10) Boubyan Bank (June-10) Agility (June-10) Gulf Bank of Kuwait (May -10) National Bank of Kuwait (Mar-10) Al Deera Holding (Aug-09) Kuwait Finance House (Apr-09) Kuwait Financial Centre (Dec-08) Commercial Bank of Kuwait (Oct-08) National Industries Group (Sept-08) Zain (Sept-08) Global Investment House (Sept-08) Kipco (Sept-08) The Investment Dar (Sept-08) Burgan Bank (Sept-08) Automated Systems Co (Aug-08) Al Safat Investment Co (July-08)

Markaz Company Research Coverage

MSCI Arabian Markets

Conventional MSCI Arabian Markets

Islamic Local Index

Saudi Arabia 60% 64% 78%

Kuwait 83% 92% 56%

Qatar 92% 90% 95%

UAE 79% 25% 58%

Bahrain 58% 74% 23%

Oman 63% 100% 50%

Egypt 62% 100% 45%

Jordan 39% 0% 32%

Morocco 50% 70% 24%

MENA 79% 93% 63%

Markaz Research Offerings

Page 12: MENA Real Estate Market Commentary 27122011

MENA REAL ESTATE RESEARCH