Dubai-based developer DAMAC Properties has predicted that planned government spending of USD 452 billion on Gulf Cooperation Council (GCC) infrastructure projects will begin to resonate in regional property markets within the next 12 months.
“(GCC) government spending on infrastructure has a multiplier effect on the overall (Middle East) economy,” DAMAC Properties Senior Vice-President Niall McLoughlin has said.
“Major projects require an impetus of resources and skilled labour. The more money spent, the more skilled labour required to execute those projects, which attracts new people to the GCC countries, boosting demand for residential properties, both to rent and also to buy,” he said.
While there are already more than USD 450 billion worth of projects in the pipeline, rising energy prices may be a strong catalyst for regional governments to further increase expenditure on infrastructure.
Crude oil prices have risen to their highest level in two-and-a-half years and that is delivering additional revenue to the governments of oil-producing nations within the GCC, the developer said.
Converting surplus oil revenues into major infrastructure projects has long been a strategic objective of regional economic policymakers in the Middle East region.
Investment in infrastructure can have the effect of stimulating non-oil sectors of the economy, including transport and logistics, health services and education.
“We predict the wide-scale government spending on infrastructure will begin to have a significant impact on GCC property markets over the next 12 to 18 months. There is a lag-time with any fiscal stimulus and with infrastructure projects in particular, it takes time for the injection of funds to resonate in the real economy,” said McLoughlin.
Of the scheduled projects, rail infrastructure accounts for nearly a quarter of all government spending.
This includes the highly anticipated Gulf Cooperation Council (GCC) railway project, linking GCC member countries.
The 2,117-km-long network, starting in Kuwait and Saudi Arabia, is likely to take a little over five years to complete.
Qatar is also investing heavily in infrastructure following its FIFA 2022 World Cup bid.
It is estimated that Qatar will need to invest at least USD 90 billion over the next decade on housing and infrastructure..
The country has pledged to allocate 37% of its budget to major capital projects.