UAE property sector to endure growth via key policies & legislation & rising market confidence - TASWEEK

The UAE real estate sector’s strong Q3 performance this year could spell a sustained uptrend through 2014 and even beyond, with the Abu Dhabi and Dubai markets benefitting from industry growth, liquidity, and return on investments. A detailed market intelligence report for the period issued by TASWEEK Real Estate Development and Marketing showed a spike in residential rates in Abu Dhabi – the first since the 2008 market downturn. Dubai, on the other hand, saw its land and property sales soar 67 per cent over the same period in 2012. Reports from Fitch Ratings and Standard Chartered support TASWEEK CEO Masood Al Awar’s prediction early this year that Dubai’s prime property sector in particular would enjoy favorable market conditions through 2014.

Abu Dhabi

The rise in rental rates for prime residential units in Abu Dhabi has been buoyed by solid governmental support for various sectors and industries such as logistics, construction, infrastructure, tourism and hospitality. 

For tenants, some of the best deals can be found in Khalifa City (A and B), Mussafah, Airport Road and Al Ain. Saadiyat Beach, Raha Beach, Bandar and Bateen are some of the higher-end areas. Overall, the emirate’s market remains in over-supply. New supply is still in the pipeline and so further increases in market-wide vacancy rates are expected

The Municipality of Abu Dhabi City and the Abu Dhabi Department of Economic Development have collaborated on the commissioning of a new mechanism for streamlining local property management activity that can keep pace with the Tawtheeq Tenancy Contracts System. This is expected to enhance market movements in the long run.

Abu Dhabi began with an 8 per cent growth in Q1 and achieved market stability in Q2, so the Q3 numbers indicate a steady recovery for the local property market. 

Dubai

Dubai posted a stellar Q3 performance, logging USD 6.26 billion of transactions through the end of July. A similar surge occurred in mortgages over the same period.

Fitch Ratings says that Dubai’s property sector is on track to maintain its 2013 momentum through next year.  The global credit rating agency adds that retail rentals and hospitality revenues have been growing steadily since 2011 and will continue to do so in 2014. It notes a particular surge in residential prices and demand in prime Dubai locations.

Another report issued by Standard Chartered confirms the uptake in Dubai’s real estate market and further adds that the growth is being driven by improvements in economic fundamentals rather than speculation. The British multinational banking and financial services company also says that development is being fueled by stronger economic performance, a growing population, rising investor confidence, an improved regulatory environment, and anticipation over the result of Dubai’s Expo 2020 bid.

An interesting trend pointed out by Standard Chartered is how apartment prices and rents are outperforming growth in villa prices and rentals in a reversal of market movements witnessed in 2012.

Housing process continue to increase as more residents go for buying a home rather than paying escalating rents. Major developers have reported substantial profit gains as a result. More prime projects are set to launch in the coming months in master communities such as Jumeirah Village, Business Bay and Dubai Maritime City.

But while Dubai’s residential property prices are spiking, other market segments, particularly office space, continue to drag behind. This is due to limited job creation programs, adaptability trimness of corporate structures that may be an indicative of uneven recovery though the commercial property sector is making a reasonable comeback with growing interest from international occupiers and investors.

Conclusion

TASWEEK’s Al Awar says that the prospects are good for the UAE’s endured property market rally. He explains that both Abu Dhabi’s up-tempo market and Dubai’s return to form as a preferred global real estate hub in Q3 provide sufficient boosts to maintain momentum through next year. He added that the five key drivers for enduring growth are transportation and infrastructure, safer returns over various other asset classes, trustworthiness of the market, increased transactions, and strong continuous government support. Current market movements validate pronouncements Al Awar made during the start of the year that Abu Dhabi and Dubai, the primary property markets of the UAE, would elicit renewed global investor confidence and attain end-to-end growth in 2013.