Qatari Investors Are Out Of The Market As Blockade Bites

A little more than six months after its Gulf neighbours implemented a blockade of Qatar, the previously voracious real estate investor is out of the market worldwide.

Data from Real Capital Analytics shows Qatari investors have spent just $507M on overseas real estate since economic and political sanctions were put in place in May and countries like the United Arab Emirates moved to reduce imports to Qatar as part of a row over the funding of terrorism.

That is 63% down on the equivalent period last year and 95% lower than Qatar’s half-yearly investment peak, the first half of 2015 when the country’s investors spent $10.3B.

There is a cliche in real estate that at times of volatility in places like the Middle East, countries like the U.K. or U.S. see an increase in investment because they are safe havens.

But Qatar needs all of its capital to fund the issues being created at home. Inflation has risen in the country because of the difficulty in importing goods like food, meaning the government has been limiting capital outflows. Overseas capital has been withdrawing from Qatari banks, so again the ruling regime has had to step in to provide liquidity. The country's gross domestic product is predicted to drop 1% in the fourth quarter of 2017 according to Trading Economics.

Government-backed real estate companies are having to offer rental discounts of up to 50% to stop occupiers upping sticks and moving to neighbouring Dubai, limiting their ability to make acquisitions abroad, according to Cluttons partner and head of research Faisal Durrani.

“This all eats into capital reserves, and means it is no surprise that outbound investment figures are down,” he said. “They need capital to maintain the domestic economy.”

Real Capital Analytics Senior Director of EMEA Analytics Tom Leahy said that for the first time since the firm stared collecting data, the Qatar Investment Authority, the country's sovereign wealth fund, was a net seller in 2017.

He put this in the context of both the domestic Qatari situation and a wider slowdown in investment from countries heavily linked to the energy sector.

“You have to remember that Qatari investment tends to be very lumpy, and that can skew the figures,” he said. “But Middle Eastern investors have only invested around $1B on a net basis globally this year. There is a correlation that shows when the oil price is stable or falling then outbound capital into real estate slows down.”

In terms of Qatar now being a seller rather than a buyer Durrani said: “It’s hard to know if it is because of homegrown pressures or because the perceived lack of support from the U.K. and U.S. within the U.N. in terms of getting sanctions lifted. It is probably a combination of both.”