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It isworthpointingout that anescalation
of Saudi/Iran tensions may have the
effect of pushing up oil prices. But it
might also see the Saudi Riyal’s peg
to the US dollar come under pressure,
a phenomenon that many countries
that peg their currency to America’s
are currently experiencing, not only
in the Gulf. As a result, countries and
institutions that have previously been
comfortable with lending to Saudi
Arabia may become more cautious.
Certainly, such an eventuality would
have negative ramifications for the
real estate sector as liquidity dried
up and the effects of the kingdom’s
budget deficit were keenly felt.
4
Mazaya Monthly Real Estate Report -
Week 1 - January 2016
Conflict between Saudi Arabia and Iran
would serve neither side well from an
international investment perspective, at a
time when both countries strive to attract
FDI. Iran has only just seen sanctions
lifted that have kept the international
community away for decades and was
it was expected the country would see
an investment wave of some $25bn into
the energy and mining sectors over
the coming months. Conflict would
likely see this investment evaporate,
for the short and medium term, at least.
There are currently many pressures on
Gulf real estate prices, not limited only
to Saudi-Iran tensions and the declining
oil price. While some markets in the Gulf
might benefit from the tensions between
Saudi and Iran, we expect the luxury
end of the market throughout the Gulf to
suffer, thanks to the enthusiasm of Saudi
and Iranian investors to participate in
this segment. For this reason, we believe
the middle class/middle income segment
of the market represents the best value
for investors and offers the best long
term stability. We expect workers to
continue to earn in Gulf markets, and
as a result expect to see little price or
demand fluctuation in this segment.
Al-Mazaya Report concludes by stating
that while there are good grounds for
caution currently in the Gulf’s real
estate markets, pessimism should not
be overstated. Many other Gulf sectors
continue to thrive, not least tourism,
retail and industry, and we expect
these engines of growth to power
Gulf economies through whatever
short-term challenges lie ahead.