UAE’s Real Estate Market Likely To Revive Next Year
Even though there are signs of recovery in the United Arab Emirate (UAE) real estate market, it won’t see a turnaround sooner than next year. Oversupply and muted income growth are the prime factors that are exerting pressure on the market persistently, and the demand side doesn’t seem to be catching up with the volume of supply.
However, off-plan housing demand has remained strong with 6,000 residential units launched in Dubai in the first-half of the year, and another 15,000 units expected to hit the market over the rest of 2018.
This cascading effect generated by the all-new inventory has, however, shifted the demand in Dubai from the much sought-after Dubai Marina and Downtown, and has delayed the recovery in the major markets. The year-on-year sales price in these two areas fell by 6.6 per cent and 7.5 per cent, respectively, in the first quarter, industry reports show. The residential rental market was no different with the prices declined by as much as 10 per cent.
Prices, too, plunged 7.9 per cent year-on-year in Abu Dhabi while rental rates took a hit of 10 per cent, year-on-year, according to Reidin Price Index. Prices stabilised to some extent in the first quarter in Saadiyat Island. For the first two quarters, there was no downward movement, and as a result, there was a slight uptick in the purchasing activity. But, the prices have gone down by 26 per cent since 2015 on Saadiyat Island, so recovery is still out of sight.
Developers are now looking towards the middle-income affordable sector for new product launches as the higher ticket prices find lesser takers. Cavendish Maxwell forecasts point towards sales and rental prices and state that they would continue to decline throughout the year.
In the affordable category, Aldar’s Dh 10-billion Alghadeer Masterplan in its first phase comprising of 611 homes. The three-million-square-metre community was the biggest launch in the year. Despite falling sales and revenues compared to the corresponding period of the last year, there was five per cent net profit reported by the company in the first quarter of 2018. The bottom line is expected to be further boosted by the acquisition of Dh 3.7 billion assets from Abu Dhabi’s Tourism Development and Investment Company. One of the assets under this acquisition is Saadiyat Grove which is one of the two under-development projects from the tie-up of Emaar and Aldar.
Though Dubai’s Nakheel also registered a five per cent rise in net income in the first quarter this year, the market watchers are keeping their fingers crossed as they say that it has been a ‘challenging’ period.
However, the silver lining is that demand remains strong with improvement in investor sentiment. Also, the Dubai Land Department is soon going to streamline real estate conveyancing procedures so that investors can save costs. It plans to soon create a smart digitised platform for Real Estate Self Transaction (REST) that would do away with paper trails of rental and sales transactions by 2020.