The performance of UAE’s real estate sector is expected to remain subdued during 2018, with sales prices and rental rates more or less flatlining across the segments, say industry experts. Craig Plumb, head of research at JLL Middle East and North Africa (Mena), expects the UAE’s economy to pick up with the rate of real GDP growth increasing this year. “While this is clearly good news for the real estate industry, the market may not rebound strongly during the year as significant levels of new supply will continue to stifle any potential increases in prices or rentals,” says Plumb.
Sales prices and rents in Dubai’s apartment segment recorded year-on-year declines of 4.2 per cent and 6.4 per cent respectively last year. The emirate’s villa segment also saw similar trends, with sales prices and rentals falling by 2.4 per cent and 6.8 per cent respectively during the same period, according to a JLL report. Industry players expect similar trends to continue this year, although less intense.
“While I’m hoping for more positivity, sadly I think 2018 will continue to be a challenging year for real estate,” says Mario Volpi, chief sales officer of Kensington Luxury Real Estate Brokers. “I believe prices will continue to be soft in both sales and rentals, although the decline in real terms will be less dramatic than in 2017.”
In the apartment segment, sales prices will continue to decline during the first half of the year, prolonging the downward trend witnessed over the previous quarters, according to Ivana Gazivoda Vucinic, head of advisory and research at Chestertons Mena.
Gazivoda also expects apartment rents to continue to fall further in the first half.
Off-plan property
Building on a strong performance last year, which saw a total of 2,600 off-plan projects sold in Dubai, analysts expects a continuation of the same trend this year, with developers becoming more creative with payment plans and special offers.
“The key to primary-market success has been the post-handover plans, where developers have effectively behaved like banks, allowing buyers to move in and pay later over a longer period,” says Volpi.
The main areas expected to see a strong performances this year include Dubai Hills Estate, Creek Harbour, Meydan City and possibly Dubai South, says Andrew Cleator luxury sales director at Luxhabitat. “In addition, rental prices will continue to decline slightly this year, mainly due to the increase in supply and options, ” adds Cleator.
Another major trend witnessed over the past year is the shift from a predominantly investor-led market to an end-user dominated one. “Driving this shift was the growing appeal of off-plan and mid-market housing, which has made the dream of owning a home a reality for many,” says Farhad Azizi, CEO of Azizi Developments. “Encouraged by attractive payment plans, many millennial buyers are also poised to make the shift from tenants to buyers.”
Luxury market
The demographic of luxury buyers appears to be changing with more clients looking for large family homes, leading to a clear shift in requirement from penthouses to luxury villas, says Andrew Cummings, managing director of LuxuryProperty. While affordable housing was one of the main drivers of sales last year, Cummings says he expects to see a return of demand in the luxury market this year. “With Dubai globally recognised as a luxury residential destination, further launches in prime locations like Dubai Hills and Dubai Creek Harbour will help meet this demand and enhance the city’s reputation,” he adds.
Commercial sector
With 2018 set to see an improvement in broader economic conditions for the UAE, industry players expect a positive impact on other real estate segments. “As a result, we expect to see sustained demand levels for good-quality office accommodation, which will underpin stability in the prime office sector,” says Simon Townsend, senior director, strategic advisory and head of valuation, advisory and consulting at CBRE.
New supply in Dubai’s office sector is slated to reach 9.13 million sq m this year, according to JLL. Despite the rise in supply, Knight Frank expects the prime leasing market to edge up moderately, with the mainstream market showing signs of recovery. “We expect increased commercial activity in Dubai during 2018,” says Taimur Khan, senior analyst at Knight Frank.
Dubai’s retail sector also came under increasing pressure last year due to rising supply, with primary and secondary malls recording an average rental fall of 8 per cent and 9 per cent year-on-year, according to JLL. Since the market is expected see new supply of around 579,000 sq m in gross leasable area over the next 12 months, analysts anticipate a similar trend of weak performance this year.
VAT impact
Industry players say it is too early to predict the impact of value-added tax on the market, with most expecting a period of adjustment during the early period of the implementation. “Initial indications are that [VAT] will not have a material impact on the market performance — the underlying market fundamentals remain strong and will absorb these impacts,” says Townsend.
Robert Welatentz, CEO of Majid Al Futtaim Properties, says 2017 had been a year of learning and opportunity for the industry at large, with a strategic focus on delivering customer value in a market marked by increased competition and changing customer expectations.
“In 2018 and as we draw closer to the World Expo 2020, the UAE’s property sector will continue to evolve with new business models and concepts, all centred around the changing customer profile and their needs,” says Welatentz. “At the same time, in the year ahead, the greatest opportunity and challenge for GCC developers will lie in their ability to identify sector trends and customers’ needs in order to stay ahead of the curve.”
