Dubai real estate easing up

Outlook for UAE market remains positive on strong demand: Bayut.com

 

Dubai — The outlook for Dubai’s real estate market remains positive as the demand for residential and commercial spaces will resurge in the near future due to growing population in the emirate, a report says.

The latest data issued by a leading property portal Bayut.com said the current slowdown in the market should be considered a much-needed hiatus as price adjustments provide a sigh of relief to both the government and analysts who feared another market collapse.

The report, which showed a mixed trend in May, indicated signs of an efficient easing as well as sporadic gains in certain segments as the buzz of about 25,000 additional housing units coming into the market in the ongoing year has found little ground, with estimates now putting the number of these new units close to the 12,000 mark.

“Although the revised estimates about new units being added to the market have relieved a majority of stakeholders across the emirate, there remain fidgety landowners who continue to compromise on rents just to keep their premises occupied,” according to the report.

Bayut.com noticed that the trend in certain areas had given way to the notion that rents were on the decline across the market. It also fanned talks of “off-grid” deals — owners agreeing to rents outside guidelines from the Real Estate Regulatory Authority, or Rera — and brought criticism to the Rera.

The report mentioned few reasons for the price changes in the Dubai market and said a heightened demand in past two years drove prices up rampantly, but the values corrected themselves in the period of stabilisation. It also attributed the credit to the Dubai government, which introduced regulations last year to ease speculation and avoid market overheating.

“The regulations imposed by the government have started to bear fruit. The effects of mortgage cap and hike in registration fees have now become pronounced and are pushing the market towards stabilisation, while helping it lose some of the excess weight it put on earlier,” it said. 

Global trend

The Bayut.com report said major markets across the globe are experiencing slow growth as forecasted by the International Monetary Fund recently. Comparing prime real estate in New York and Singapore — which lost 4.4 per cent and 12.6 per cent of value in March 2015, respectively — the report said the Dubai property market dropped just 1.1 per cent during the month.

The study highlighted another important point: the strengthening of the US dollar against the pound sterling and other currencies, notably the Indian and Pakistani rupees, has made the dirham more expensive, effecting the buying decision and subsequently hampering demand.

“The oil price crunch has also affected demand from Russian, South American and Saudi investors, whose wealth has lost value due to the global crisis,” according to the report. Bayut.com’s report said some areas of Dubai defied the easing trend in rents and recorded rental gains due to strong demand.

“Deira and Karama in old Dubai while Dubai Marina and Downtown Dubai in high-end areas of the emirate maintained their allure and saw marginal fluctuations during the month,” according to the report.

The property portal said the secondary apartment market remained flat to value changes as most of the new units coming online this year fall in this segment. However, it noted that returns from large to small apartments in Dubai range from five per cent to 7.5 per cent, which is still higher compared to two per cent to 3.5 per cent returns offered by cities like Hong Kong, Singapore and London.

“The apartment-buying market is likely to see a burst of renewed activity as developers close in on launching projects aimed at low income households and tenants look to make the jump to home ownership.” The report also indicated that the villa market is likely to face pressure due to heightened supply in the market. “About 4,000 new villas will join the existing stock this year and the secondary villa market is likely to feel the heat. This means owners of villas upwards of Dh5 million will not only be affected by additional supply, but also by mortgage figures.”

Elaborating, the report said the loan-to-value ratio for Dh5 million mark is changed to 65:35 from 75:25. However, major activity is seen in the Dh3 million-to-Dh3.5 million range. 

Abu Dhabi remains steady

The market in Abu Dhabi maintained its steady growth as it clears rough patches and welcomes several new developments in the emirate. The ongoing oil price crunch has had little or no effect on a government spending, reflecting the fact that the emirate is no more relies exclusively on petro dollars.

Referring to the Abu Dhabi Planning Council project announcements, the report said the council approved more than 30 projects in May despite a steep decline in oil prices and an increase in utility charges. Last year, the council gave the green signal to 76 projects. Moreover, the government launched new laws regulating real estate under which rights of buyers were secured regarding off-plan properties. The law also announced the preparation of a real estate registry that would save all documents and data related to real estate development.

Bayut.com said the emirate sustained a steady growth trend this year so far and activity in May showed stability in the market.

“The government is also focusing on affordable housing, which will not only provide aspiring homeowners with reasonable accommodation, but also help those sharing apartments or rooms illegally find a space suited to their budget,” the report said.

“Abu Dhabi is likely to see more and more activity as the government has taken important steps to regulate the real estate market. This is likely to attract investors who will feel more confident about their investment’s security.”

— muzaffarrizvi@khaleejtimes.com