This month, we decided to shift our focus and explore the disparity between MENA investors' exposure to U.S. securities vs. real estate and debunk some common misconceptions surrounding purchasing real estate in the U.S.

Let's dive in.

A report released by the U.S. Department of Treasury in 2022 revealed that MENA investors held approximately $910 billion in U.S. securities, with 60-80% of their portfolio allocated. However, their exposure to U.S. real estate is roughly 0-5%, resulting in a significant gap between the two U.S. asset classes.

On the other hand, according to the SWFI, MENA investors allocate a much higher percentage of their global portfolio to real estate, with 20-40% allocated. This stands in contrast to their low exposure to U.S. real estate, despite their considerable investments in U.S. securities and cash.

This misalignment of exposure is on the back of a few reasons:

• The geographic distance and logistics hurdle of traveling to the U.S.

• Concerns about the complexity of the transactional process to acquire, manage, and ultimately sell U.S. property.

• Tax ambiguity.

• Weak network of tax specialists, accountants, and lawyers to offer protection, visibility, and comfort.

• Lack of regional brokerage representation (vs. European and U.K. representation).

Nevertheless, the story is changing for Gulf SWFs. According to Bloomberg, ADIA is pushing deeper into U.S. real estate investments and has raised its target allocation from 45% to 60% for 2023. Neighboring PIF has also been increasing its exposure with the expansion of its New York office and real estate division, which is now the largest compared to London and Hong Kong.

Bottom Line: We believe that when this misalignment is addressed, U.S. real estate will claim a more substantial portion of MENA investor portfolios, comparable to their global share. Therefore, education on U.S. real estate is paramount in the region, and that is where Bayti comes in.

To equip you with a competitive advantage, let's debunk some myths surrounding purchasing U.S. real estate.

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