Long-term capital growth now main objective for GCC investors

Long-term capital growth now main objective for GCC investors

Almost a quarter of investors across the region will now be choosing new assets based on their ability to deliver long-term growth – so which investments should they be prioritising?

Summary:

  • Over half of investors in the GCC have declared that they will be investing in the future for different reasons compared to those that determined past investment decisions
  • 21% will now be seeking out long-term capital growth, with owning assets that can deliver a regular income also a priority for 18%
  • With gold, domestic property and overseas property cited as the three most popular investments in the GCC, which will best help deliver these new goals?

More investors in the GCC plan on buying assets that can deliver the strongest levels of long-term growth.

That’s according to the GCC Investor Report 2018, a new YouGov survey of investors based in all countries of the Council, commissioned by Select Property Group.

When asked about their future investment motives, 21% said that long-term capital growth would now be their primary objective from a new asset; this was followed by earning a regular income (18%) and financial security (17%).

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Previously, the survey found that earning a regular income was the key focus for most investors in the region (23%), followed by long-term growth. Breaking the findings down by country, more Saudi Arabia-based investors (56%) previously placed a greater emphasis on earning a regular income than those based in the UAE (45%).

But for 51% of GCC investors, their investment motives in the future will now change. This figure increased to 56% when speaking to investors in the UAE, compared with 45% of those surveyed in Saudi Arabia.

The report highlights that domestic and overseas real estate, along with gold, will attract the highest levels of GCC investment in the future – so which investments are best placed to achieve these new objectives?

In focus: Aligning asset classes with investment goals

Gold

71% of GCC investors state that they plan to buy gold in the future, with over 4% outlining their intention of investing more than USD 500,000 into the commodity.

Gold is a popular safe-haven asset. Investors buy it in times of economic and political uncertainty, as gold is not closely correlated to stock markets, with many regarding it as a key component of any diverse portfolio.

It’s renowned for being able to deliver strong levels of long-term growth, with the value of gold increasing as investors flock to buy it.

Long-term capital growth now main objective for GCC investors

For example, when the value of the US dollar fluctuated between 2008 and 2012, gold prices almost doubled, as investors rushed to seek a more secure, long-term asset.

But this growth can be a little more difficult to predict than with other investments, with the highest growth largely based on investor demand when external political or economic factors arise.

What’s more, selling gold is the only way money can be made from it, with investors unable to earn a regular income in the form of yields.

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Domestic and overseas real estate

Property, on the other hand, can deliver GCC investors with both the long-term growth and regular income that they seek – but investing in the best market is key to achieving the highest returns.

79% of investors in the region plan on buying more real estate in their home country, while the demand for overseas property is soaring, with proposed future investment levels into international real estate 25% higher than current spend levels.

Like gold, property is regarded as an important asset to add to a diverse portfolio, while it too also has a low correlation to stocks, making it a truly safe-haven asset.

But to ensure the highest levels of appreciation and annual returns can be achieved, selecting the right location is crucial, which explains why many investors in the region are now considering making a property investment overseas.

The UK, one of the most popular international property market for GCC investors, is renowned for both its security and its growth.

Future performance can also be predicted more accurately than gold, with forecasts underpinned by supply and demand levels rather than any external economic factors. Over the next five years, average UK property prices are expected to increase 14.2%, while rental prices are also tipped to grow 17.6% by 2021.

Analysis: Adam Price, Managing Director of Select Property Group

The most successful investments are made when undertaken with a long-term mindset, and it’s great to see that so many investors in the GCC have that mentality.

Each day, our team talks to clients across the region about focusing on making investments into markets that can achieve the highest levels of growth not just in a couple of years’ time, but 10 and 20 years after that, too.

For example, our latest property developments are located in Manchester, the city with the UK’s highest property returns and where economic growth is rising the fastest.

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Already home to FTSE 100 companies, a GBP 59.6 billion economy and one of the country’s fastest growing populations, surging levels of global investment is forecast to continue Manchester’s upward trajectory – and this is creating a huge opportunity for property investors.

Over the next four years, both residential property prices and rents are predicted to rise both 81% and 40% faster than the UK average respectively. But beyond that, there’s a growing sense among business leaders and market analysts alike that the city’s property market has the potential to enjoy the kind of growth once experienced over the last 30 years in London.

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