Dubai construction set for growth
A view of Shaikh Zayed Road in Dubai. Driven by infrastructure investments, the Dubai construction sector is poised to outperform the overall UAE market. - Photo by Dhes Handumon
Dubai - Robust government investment in infrastructure sectors expected.
In the run-up to the Expo 2020, the Dubai construction sector is poised to outperform the overall UAE market, although growth across the emirates is expected to remain healthy at 6.6 per cent despite low oil prices, market watchers said.
Government investment will be robust in infrastructure sectors, while the biggest risk stems from private investment in Abu Dhabi, which will be adversely affected by lower oil prices, according to the latest Research & Markets report.
"While lower oil prices pose little threat to the UAE's construction industry outlook overall, we forecast real growth in 2016 of 6.6 per cent in real terms year on year," the report said.
Abu Dhabi has the largest infrastructure investment programme in the UAE, but its market is the most exposed to the fall in oil prices, given its economy's reliance on the sector.
"Dubai and the Northern Emirates' fiscal position, which relies much less on oil revenue, will be buoyed by our expectation for growth in the non-hydrocarbons sectors of the economy," the report observed.
"The residential and non-residential building outlook remains positive as measures to cool the market take effect. Numerous measures have been undertaken, such as rent caps and requirements of about 50 per cent payment before property transfers occur, to prevent speculative buyers from overheating the residential market. Additionally, tax increases for Indian buyers should cool demand in the market," said the report.
Upgrading growth forecasts in the UAE's construction sector for 2015, analysts said the UAE government investment would be robust in infrastructure sectors.
"We see real growth of 8.3 per cent in 2015 [up from 4.8 per cent in the third quarter], and average annual growth over the 2015-2019 period at 7.2 per cent [up from 5.8 per cent]," they said.
Abu Dhabi has the largest infrastructure investment programme in the UAE, with the water and power sectors securing Dh17.5 billion in government financing over the next five years. Following this, the housing and social infrastructure sectors secured Dh12.7 billion.
The first phase of Abu Dhabi's 1,200 kilometre national rail network, the Etihad Rail, is already under way. The railway will extend across the UAE, from the border of Saudi Arabia to the border of Oman.
The first phase of the Abu Dhabi Metro project is envisioned to start construction by the end of 2016 and start of 2017. It is planned to serve the whole of Abu Dhabi and will connect the emirate to Al Ain, Dubai, the Western Region and even Saudi Arabia.