The impact of decreasing oil prices on the GCC RHC market
Slumping oil prices have severely affected the countries in the Gulf Cooperation Council (GCC). This has lowered government revenues which has negatively affected spending plans. Oil price volatility is anticipated to continue, and although the GCC governments expect to raise non-oil sector revenues to fund their spending programs and reinforce the regional economic growth, governments are reviewing their spending commitments and priorities on infrastructure projects.
One of the key non-oil sectors that is earmarked to help diversify revenue streams and economic base is real estate, hospitality and construction (RHC). The oil price dip has negatively impacted the RHC sector across the GCC with a slowdown that is expected to continue over the next two years. However, the governments’ commitment to host mega events, such as Expo 2020 Dubai, 2022 FIFA World Cup Qatar and various initiatives of the GCC governments should boost the RHC sector.
Negative impacts of the recent plunge in oil prices will affect the RHC sector in the GCC region over the next two years. However, the long-term outlook of the RHC segment remains positive. The GCC governments’ spending on social infrastructure investment will continue to spur economic diversification and employment creation in the region. The demand for retail and affordable housing is anticipated to help underpin solid fundamental growth, and the hospitality segment is predicted to grow in the region with a rise in business and leisure tourism. Furthermore, the governments’ commitment to implement their key visions and strategies, should help maintain stability in the real estate investment markets.
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