UAE realty set to stabilise

After facing headwinds during the first half of 2019, the UAE real estate sector is likely to stabilise over the next 12 months on the back of a series of government initiatives aimed at boosting sentiment and drive demand, property experts said.
"Overall market sentiment should improve in the long run with the announcement of stimuli such as the new visa regulations. While the benefits of these initiatives are not likely to have an immediate impact, we do expect some sectors of the real estate industry to pick up in the run up to 2020," said Dana Salbak, research associate at JLL Mena.
"While the residential sector in, both, Abu Dhabi and Dubai witnessed subdued performance overall, new initiatives to drive expat home ownership will likely boost demand. The office sector, too, will witness potential upside from these new initiatives launched to stimulate the economy," Salbak said.
While average sales prices and rents softened across most communities in Dubai in the second quarter over the 12-month period from the second quarter 2018, the average rate of price decline has slowed, Cavendish Maxwell's UAE Property Market Report said. "Average apartment prices declined 15.1 per cent and villa/townhouse prices declined by 14.7 per cent in Q2 2019 from a year ago. During the same period, rental declines for apartments in Dubai averaged 12.5 per cent and villas/townhouses similarly registered a fall of 12.6 per cent," it said.
"Off-plan transfers continued to dominate in Q2 2019, accounting for more than 52 per cent of total transfers. In Abu Dhabi, average sales prices declined by 12.6 per cent for apartments in major investment zones, from Q2 2018 to Q2 2019. Villa/townhouse prices registered a similar average decline of 12.1 per cent over the same period. Rents in Abu Dhabi continued to fall in Q2 2019, for both apartments and villas/townhouses. Sharjah, Ajman and Ras Al Khaimah remain affordable alternatives for buying and renting of properties in the UAE," said the Cavendish Maxwell report.
Aditi Hariharan, Senior Consultant, Strategic Consulting and Research at Cavendish Maxwell, said the first half of the year remained challenging for the UAE property sector, as rents and prices continued to decline. "Conditions remain conducive for tenants who are well-positioned to demand rent-free periods, fee waivers and flexible payment terms from property owners, and potentially upscale to bigger units which may have previously been beyond their reach."
"While we have noticed a slower rate of price declines in some areas over the last 12 months, this is still contingent on new supply and actual materialisation rates, which have averaged 40-50 per cent over the past few years. The government continues to introduce measures to stimulate the market, with Abu Dhabi recently opening up investment zones to expat property buyers for the first time," said Hariharan.
Consulting firm ValuStrat reported that the second quarter ValuStrat Price Index (VPI) for residential properties displayed an overall 11.5 per cent annual fall in capital values, with quarterly declines decelerating to 2.9 per cent.
"This downward trend resulted in 29.3 per cent citywide capital value loss since the peaks of mid-2014. All established freehold locations monitored by the VPI witnessed price drops since the last quarter, ranging from 1.2 per cent to 4.2 per cent," said the report.
- issacjohn@khaleejtimes.com