• Appeal of real estate likely to grow among wealthy Gulf investors
  • Regional capital markets still lack depth
  • Emirates Investment Bank CEO wants to see investors review portfolio concentration

High net-worth individuals (HNWI) in the Gulf still prefer to invest in real estate rather than stocks and bonds, says Khaled Sifri, CEO at the Dubai-based Emirates Investment Bank (EIB).

Speaking to MEED, he says Gulf investors are mainly opting to invest in illiquid real estate assets, or they put their money in highly liquid cash and deposits.

“Historically, real estate has rewarded investors well, so they continue to view it as a good place to be. There’s a lot of comfort gained from having a physical asset where you place your investment,” he says on the sidelines of a media briefing on 8 March.

Approximately 30 per cent of HNWIs’ wealth is currently invested in real estate, while 17 per cent is placed in cash or deposits, according to the EIB’s 2015 survey on the activities of the Gulf’s highly wealthy individuals.

The HNWIs are defined as those investors with more than $2m in investable assets.

About 33 per cent of wealth is reinvested back into the investors’ own companies.

The appeal of real estate continues to grow with eight out of 10 investors saying they expect to increase their property investments, the 2015 survey found.   

In comparison, appetite for stocks and bonds remains limited. Only an average of 6 per cent of investors’ wealth is invested in stocks, while just 2-3 per cent went into bonds.

The lack of appetite for these investments is due to the size of the regional capital markets compared with the depth of markets in developed countries.

“They are not as deep, they are not as liquid. The options available in terms of the potential instruments are not very wide,” Sifri says. He would like to see Gulf investors reassess the risk concentrations in their investment portfolio and consider more opportunities in medium-risk investments, such as bonds.

“We want whole industry to step up and fill that space that is unfilled at this point,” he says.

Real estate assets can be risky due to their illiquid nature, he says, meaning that if investors want immediate access to liquidity they may not be able to from real estate assets if property prices at the time are depressed.

EIB is working on some new products that will help investors tap into more medium-risk capital market investments.

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