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Where will Middle Eastern real estate investors go next?

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Inevitably, the international real estate sector was impacted heavily by the Covid-19 pandemic. Travel restrictions in particular prevented investors from the Middle East operating internationally, with Q2 2020 being the lowest quarter of activity from Middle Eastern investors in Europe for a decade.

As restrictions ease and the global distribution of the COVID-19 vaccines lead to global economic recovery and the reopening of travel corridors, Middle Eastern investors will once again target assets abroad. While the UK is a perennial favourite of investors from the region, the Netherlands and Germany are of particular interest, and even Central and Eastern European countries are becoming increasingly attractive.

A YEAR OF REAL ESTATE DISRUPTION

But, after a year of disruption, secure, long-term investments will be the order of the day.

Global real estate services provider Savills predicts that investors from the region will focus on regional markets in the UK and secondary European cities, prompted by low yields on assets in the continent’s major cities.

Nevertheless, London is unlikely to see a drop in residential investment from Arab buyers. Long regarded as a safe haven for investors, the city has been bracing itself for a rush of Middle East property buyers once travel restrictions are lifted.

PORTFOLIO DIVERSIFICATION

Another important shift has been a move towards portfolio diversification as investors look to immunise their portfolios against cyclical downturns. Middle Eastern investors are likely to target different types of real estate, especially emerging asset classes such as student accommodation, the private rental sector, senior living and healthcare.

And as e-Commerce sales jump, there may also be a move towards investment in existing logistics assets such as retail warehouses and distribution centres—indeed, a relative shortage of supply may even prompt investors to fund new developments.

According to Gulf Business, another notable trend is the increased importance of Middle Eastern private investors. Regional geopolitical uncertainty has led many to diversify into international markets for wealth preservation—this flow is sure to increase in 2021 and beyond.

Whatever happens, analysts are certain Middle Eastern investors will remain a key spoke in the international real estate sector once travel restrictions are lifted, with European cities remaining among the beneficiaries of property investment from the region.

 

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