Middle Eastern wealth dilemma impacts real estate

Middle East has faced another problem recently.

While some countries of the world are cash-strapped, the Middle Eastern regions possess more funds than they can spend within their borders spurring a significant cash outflow in the amount of US$180 billion (approx. €133 billion) towards the Western European real estate market expected to take place during the next decade according to the latest data from international real estate advisor CBRE. 

Such a market phenomenon can be explained by rapid income growth of Middle Eastern investors that has far outpaced the property construction in the sector, making capital providers turn their gaze to Western European institutional real estate, which appears to be the main target of the cash flow taking 80% of $180 billion (around $145 billion). UK has gotten an edge in attracting the investment with $85 billion anticipated to enter the kingdom’s market. Next in line are France, Germany, Italy and Spain. 

Middle East has become one of the leading investors of intercontinental market, having contributed $45 billion into the investment pool between 2007 and the end of 2013 seven times outmatching the numbers of its domestic performance. Middle Eastern funders aim to get a lion’s share in the direct real estate sphere.  

Middle East Sovereign Wealth Funds (SWFs) has acquired the role of the most affluent and ambitious capital providers of the world, having reached 35% of SWF’s Assets Under Management (AUM) worldwide. These resources present the least significant portion (9% of total portfolio) to any other assets in contrast with Western and Asian SWFs. The continuous interest in global commercial real estate would mean an immense amount of wealth entering the market, having an important impact on the global capital distribution.