Recently, there seems to be no escaping the grim headlines about plunging oil prices. Oil futures have lost 75 percent of their value since mid-2014, severely damaging the national economies of oil producing countries like Venezuela and Nigeria. Middle Eastern oil producers – particularly those within the GCC, composed of Saudi Arabia, Kuwait, Bahrain, Oman, the United Arab Emirates and Qatar – are not hurting quite as badly. This is proven not only by their refusal to reduce their oil production, but also by their continued participation in the global real estate investment market, where they have been major players since the 1990s.Investors from the GCC poured 5 billion USD into the US and European real estate markets in Q1 2015 alone. With the crash in oil prices pushing investors from the region to diversify quickly and strategically, investors are drawn to familiar shores where they can count on a reasonable return on investment.However, recent political upheavals in Europe following the terrorist attacks in Paris last year and tensions caused by the Syrian migrant crisis have caused certain investors to focus on the US. A major investment company based in Kuwait has recently expressed to our investor analysts that they are far more interested in income-generating properties in the United States than in Europe, highlighting this trend.Kuwaiti investors are also being pushed to spend on real estate beyond their borders by the regulatory conditions in their home country. Kuwait Projects Co (Kipco), the country’s largest private-sector investment firm, announced plans last month to develop a 5 billion USD real estate project outside of Kuwait City.However, the development is haunted by the specter of Kipco’s previous bid to develop Abdullah Al-Ahmed Street. The bid was initially successful, before being cancelled by parliament. A full decade has passed since then, and the company’s vice-chairman still acknowledges concerns about bureaucracy putting a halt to their most recent development project.Kuwaiti investors are ready and willing to spend capital on real estate projects, and many are choosing to not just step over the red tape in their home countries, but fly over it – all the way to the US. And on the ‘pull’ side of this equation, the real estate market in the US is becoming ever more welcoming to foreign investors. Last month, President Obama signed into law a regulatory change designed to facilitate foreign investment into US real estate. The law waives the Foreign Investment in Real Property Tax Act, or FIRPTA, allowing foreign pension funds to enjoy the same freedom of investment as domestic pension funds.Commenting on the regulatory change, Jeffrey DeBoer, president and chief executive officer of industry lobbying group Real Estate Roundtable, said: “By breaking down outdated tax barriers to inbound investment, the FIRPTA relief will help mobilise private capital for real estate and infrastructure projects.”Cross-border investment into US real estate reached 78.4 billion USD in 2015, and the lifting of FIRPTA is set to see hundreds of billions of dollars pouring into the US real estate market. Kuwaiti investors will doubtlessly be among the foreign investors flocking to the market in the near future – pushed by oil prices and bureaucracy, and pulled by the prospect of attractive yields and a welcoming investment climate.Naseba is a multinational business facilitation company headquartered in Dubai. We have spent 14 years building an extensive network of contacts in the GCC, and leveraging this network for deal facilitation purposes. On April 27th, we will be organising the Real Estate Investors Meeting in Doha, Qatar. At the meeting, real estate investment project holders from around the world will be introduced to qualified investors from Kuwait and elsewhere in the GCC.
To submit your business case and register for the meeting, click here.