While 2014 has been a good year for the UAE’s real estate, it didn’t quite witness the jet-fuelled surge of 2013.
The past year started much like how 2013 finished, provoking a warning about instability from the IMF. But the rate of growth settled into a steadier pace as the year progressed.
A slower rate diminished the chances of another bubble being created along the lines of 2007-08. The industry learnt the harsh lessons from 2009 and new regulations were brought in, namely the increase in transfer fees in Dubai from 2 per cent to 4 per cent, and mortgage caps announced by the central bank.
There were also signs in 2014 of a more mature market in Dubai, with yearly cycles beginning to emerge. In this case, the vacation period and Ramadan impacted upon the market between Q2 and Q3, with more people being away and fewer deals done. You see this sort of pattern in all of the established markets.
The year 2013 wasn’t quite so frenzied in Abu Dhabi, although the market was still on an upward trajectory. Last year continued the emirate’s steady year-on-year growth at around the 30 per cent mark. The rental market was different, as the government scrapped rent caps and for a while tenants were on the receiving end of some quite significant increases, in some cases as much as 26 per cent.
So if 2014 was markedly different from 2013, what can we expect for the UAE’s real estate market in 2015?
In Dubai the more manageable rate is predicted, with the figure of 4.5 per cent quoted by many, although some see things slowing a touch more.
More people and more jobs mean that demand will surely continue to rise. Expo 2020 is going to be huge for and 2015 is when the real activity will kick off. We are likely to see more developments unveiled throughout the year in addition to the 27 announced at Cityscape a few months ago.
In Abu Dhabi, 2015 is expected to be different. The lag between supply and demand is greater. And the lag will continue for another two to three years yet. Such a lag fuels growth, of course, and the expectation for growth over the next 12 months is set to continue at around the 30 per cent mark.
Rents are predicted to remain steady as new apartments come onto the market — as many as 18,000, according to JLL.
In Dubai, the rental market situation is similar. Rents may barely go up and might, in some cases, fall a little. Again, some tenants have voiced their doubts that this will be the case, having received recent increases which they claim to be as much as 15 per cent.
Overall therefore, the signs for 2015 are good, but is there anything that the industry should be mindful of?
Had the surge from 2013 continued then the fear of another bubble might have grown further. This is now diminished.
The situation with the price of oil is a little more worrying, and any ramifications of this would perhaps affect Abu Dhabi’s real estate more than Dubai, which has less reliance on the black gold and does more through tourism and general business. But at the moment there are no serious concerns over this.
So it seems that 2015 is looking like it could be a good year with some exciting twists. The outlook is positive and, while you can’t ever predict with certainty what will happen, I think that the sector has matured so much that we can deal with any surprises effectively and with confidence. Let’s see what happens.
The writer is the CEO of Sherwoods, a property services firm.
