DUBAI Jan 22 Serviced apartments in Dubai could
offer investors double-digit annual yields before additional
supply reduces the sector's profitability going forward, a
banker at HSBC said.
The sector is receiving interest from investors looking to
acquire developments or convert existing idle commercial office
blocks into serviced properties, Nick Levitt, head of commercial
banking for the United Arab Emirates at HSBC, said.
Given the low interest rate environment in many developed
markets, investors desperate for returns have flooded into a
number of different emerging market assets.
"The reason why there is so much interest is because there
is double-digit growth in there," Levitt told reporters at a
media event on tourism in the Gulf Arab state. "If you have got
a whole bunch of investors moving into that type of asset class,
you soon create an oversupply which becomes an issue."
While future oversupply in the serviced apartments sector
was a concern, yields should be supported by Dubai's thriving
conference industry and demand from those seeking refuge from
regional troublespots. "The anticipation is there won't be a
major correction," Levitt said.
After being hit by a burst real estate bubble and the global
financial crisis in 2008, leading to debt problems at state
firms, Dubai has shown renewed vigour in recent months, with big
new projects announced.
At the heart of the revival has been Dubai's traditional
strengths of tourism and logistics, as well as its status as a
safe haven in a politically volatile region.
"With regional unrest, people are coming to Dubai where they
might have gone to other locations in the past," said Susan
Potter, group director, hospitality, for MKM Commercial Holdings
which runs Dubai's Wafi complex, among other interests.
"A lot of families prefer to stay in apartments if they are
going to be here for a period of time."
(Reporting by David French; Editing by Dan Lalor)