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Lower oil prices are leading to a fiscal restructuring across the GCC’s hydrocarbon economies, which involves both reduced government spending and increased government revenue through taxation, while impacting capital flows into real estate, according to a new report by real estate advisory firm JLL. Fiscal restructuring is already evident in the form of budgetary cuts among GCC countries, including the UAE.
JLL noted that GCC governments are also seeking to raise additional revenue through sales tax, land/housing tax and reduction/removal of subsidies. Such developments could also have implications for various real estate stakeholders.
“While we remain positive on the long-term outlook for real estate markets across the region, there is little doubt that the rebalancing of the fiscal position will result in headwinds and challenges over the next 12 months,” said Craig Plumb, Head of Research at JLL Middle East and North Africa. “While governments continue to spend on development and infrastructure projects, the level of this spending will inevitably be curtailed over the medium term as spending needs are realigned with the reality of lower oil revenues.”
Meanwhile, despite lower oil prices, JLL’s data shows that Middle East sovereign wealth funds (SWFs) remained active purchasers of global real estate this year. A total of 38 deals worth $6.5 billion (Dh23.87 billion) were transacted over the nine months to September.
While the number of overseas transactions has declined from the 74 deals seen in 2013, the value of investment has remained high and is likely to exceed that experienced in 2014. JLL, however, cautioned that the volume of investment is expected to decline in 2016 because of a prolonged period of lower oil prices that will cause sovereigns to reconsider their objectives and strategies.
Source: Property Weekly