In the office sector, supply continues to target newer sources of demand, such as robotics, IT and healthcare, as these sectors drive rapid occupancy of such space, the Kamco Invest report said.
"We reiterate that 2022 will be a new base year for office real estate demand, including new and existing office space inventory. In addition, temperature-controlled space, cold storage centres and bonded warehouses continue to command a premium of at least 25-30 per cent at the top end of the industrial warehouse market," the report said.
In the retail real estate market, mall space developers are focusing on the benefits of cross-shopping relationships and their impact on footfall and consumer spending when planning and selecting retailer portfolios.
Strong NOI (net operating income) performance across sub-sectors, coupled with the twin risks of further interest rate hikes and prolonged high interest rates, is likely to push real estate assets in certain areas into a later stage of expansion, the report said.
"That said, developers remain cautious about these trends and expect to announce launches that may cater for a more normal demand environment going forward," it added.
According to Kamco's analysis of official estimates, real estate sales transactions in the GCC reached $143.1 billion between January and October 2022, surpassing the figure for the whole of 2021 ($136.9 billion).
The UAE (Dubai and Abu Dhabi combined) contributed more than 48% of the total transactions, while Saudi Arabia added 35.6% to the region's transactions.
The higher transaction activity was driven by transactions in Dubai, which grew by almost 81% year-on-year during the period. Luxury properties were in high demand and prices rose, while affordable housing also saw healthy growth.
Investors are likely to weigh the residential market more carefully in 2023 due to the higher prices prevalent in the market, which is likely to lead to a flat run rate of property transactions going forward.
Price growth is also likely to cool off, driven by more realistic internal rate of return (IRR) expectations and rising mortgage rates, the report said.
However, the number of transactions in the GCC fell by 6% year-on-year to 511,239 deals between January and October 2022, despite a 61% jump in Dubai and a decline in other markets such as Saudi Arabia, Qatar and Kuwait compared to the same period in 2021.
In addition, markets such as Saudi Arabia (+35.5%) and Dubai (+12.2%) achieved a significantly higher average value per deal, indicating strong end-user demand and appetite for investment.
The average value per transaction in the GCC in 2022 (c. US$280,000) also exceeded the 2017 average (c. US$223,000).
At the current annualised rate, sales transactions are set to reach one of the highest levels ever, with strong demand for both off-plan and completed residential assets.
Transactions in Saudi Arabia and Dubai combined reached US$107.8 billion between January and October 2022 and are likely to approach full-year figures for the entire GCC from 2021 onwards.
Demand in the Saudi residential sector will continue to be driven by Vision 2030, which aims to increase home ownership to 70% by the end of the century, and as of mid-2022, the Saudi Real Estate Refinancing Company estimates that home ownership has reached over 60%.
However, rising interest rates have led to a reduction in mortgage lending, as the number of mortgages fell by almost 17% y-o-y between January and October 2022.
All of the GCC's real estate sub-sectors performed better in 2022 than in 2021, with strong price and rental growth in residential and prime industrial warehouses. Office supply targeting new sources of demand such as robotics, IT and healthcare will continue to see rapid occupancy of such space.
Investor sentiment gains momentum in 2022 and leads to opportunistic buying in selected GCC markets and residential product types, similar to the trends seen in 2021.
As a result, markets such as Dubai (+9%) and Jeddah (+20%) saw price increases on a year-on-year basis at the end of the third quarter of 2022, according to JLL.
Developers continue to offer more flexible payment plans with lower down payments and post-completion schemes to attract off-plan and first-time buyers, while catalysts and product demand vary across the GCC markets.
Abu Dhabi witnessed a surge in demand for off-plan and developed villas in built-up communities in 2022, with certain developments experiencing double-digit growth year-on-year in percentage terms.
The rising interest rate environment has also prompted mortgage buyers to enter the market early to lock in fixed rates for the longest terms across the UAE.
According to Property Monitor, rents in Dubai are set to grow by around 20-25% y-o-y by the end of the third quarter of 2022 as landlords look to capitalise on the strong market trend.
As a result, total rental yields in Dubai expanded by around 70bps by October 2022 compared to the beginning of the year, despite price increases, according to Property Monitor.
The consultant further mentioned that yields for flats were reported at 6.87%, while row houses and villas averaged 5.97% and 5.12% respectively.
Rents are rising in all major residential markets, with Doha (+15.0%), Jeddah (+11%) and Kuwait (+4%) following Dubai in terms of year-on-year growth from September to the end of 2022, the report said.
