KPMG: Outlook for golf real estate in Europe, Middle East and Africa

(January 17, 2012) With challenging economic conditions set to continue, what is the outlook for integrated golf real estate developments in Europe, the Middle East and Africa? Andrea Sartori, Head of KPMG’s Golf Advisory Practice, discusses key demand and supply characteristics, and why the Mediterranean region could be hot property again.

What is the outlook for integrated golf resorts and real estate developments?
Clearly, with the combination of continued liquidity problems and lack of confidence and financing for both developers and real estate buyers, the climate for golf development remains unfavorable. The increasing equity requirements of financial institutions, the growing cost of debt (especially because of the increased country risk in markets which were previously considered to be relatively safe, such as Greece, Italy, Spain and Portugal), and the increasing expectations of investors in terms of returns, means the market for golf resorts with real estate will continue to suffer for quite some time. However, there will be a point in time when the international economy recovers and developers will be looking at markets where there is strong domestic demand and tourism appeal to attract international buyers and golf tourists.

Specifically, what challenges are golf developments with real estate facing?
There are three types of buyers for residences on golf estates – owners looking for a primary residence, international second-home owners, and speculative investors. Overall, there are less international second-home owners since the economic downturn and the speculative investor has virtually disappeared. In my opinion, the first markets to bounce back will be those with a potentially strong domestic demand, which are also appealing to the international market from a tourism perspective. For example, some countries in the Mediterranean region including Italy, France and Turkey have favorable characteristics in this regard.

Will the speculative market ever return?
I think speculators will eventually come back, at a later stage, but on a much smaller scale. Nobody knows when this will happen. I would also like to point out that for the long term success of a project it is dangerous for a developer to rely on too many speculators buying properties. I think the market – especially in the UAE – has learnt the lesson in this regard.

 

For the full interview, visit: http://www.golfbusinesscommunity.com/article/outlook_for_golf_real_estate_in_europe_middle_east_and_africa_return_to_the_mediterranean