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UAE Real Estate Analysis - Q1 2014

With strong fundamentals and steady confidence the UAE economy maintained its pace growth during the first quarter of the year; the country’s macroeconomic indicators are expected to keep on strengthening throughout the year.

See alsoDubai Market Watch Q2-Q3 2014

Contributing significantly to the UAE economy the real estate and construction sector remains in the limelight during this quarter showing momentum in both rent and sale rates overall the city. However experts trust this is a sustainable growth in a mature market regulated by the cooling measures introduced at the end of 2013 by Dubai’s Government. Measures aimed to reduce speculation include change in the property transfer fees from 2% to 4%, a new mortgage cap for UAE Nationals and Expatriates along with the release of a new regulation decree set to define the rental increase through the Ejari online system.

Dubai Apartments - Residential Market Outlook

Quarter-over-quarter as well as year-over-year the number of sale transactions overall the city remains stable with the greatest percentage change recorded by Dubai Land Department in Jumeirah Beach Residence (JBR). Whilst Dubai Marina shows the strongest performance during the last quarter we expected a higher activity in JBR and Dubai Marina; however the increasing number of off-plan projects and the abandoned projects resuming being released to the market give investors more options.

Residential Apartments Transactions

The constant appeal of JBR and Dubai Marina lies in the excellent quality of the residences and the community facilities, its ideal location along Sheikh Zayed Road at a walking distance to the beachfront and two metro stations. Additionally dwellers enjoy outstanding sea views, Dubai’s longest promenades surrounded by countless restaurants, coffee shops, hotels and retails. Impressive yachts emerged in the Marina reflecting the luxurious lifestyle of the inhabitants combining perfectly business and leisure in the heart of the ‘New Dubai’.

We believe the upcoming completion of two major developments in these districts will positively affect the demand of the area: The Beach developed by Meraas including a 1km-long mall, an open-air cinema and many recreational facilities opened its doors in February while Dubai Tram‘s completion is scheduled at the end of the year.

Downtown’s sale transaction numbers stabilizes this quarter; Roots Land on the other hand recorded rising demand in this area with many enquiries from potential buyers and tenants. Supported by numerous infrastructures and facilities, the ongoing extension of Dubai Mall together with the recent completion of several projects and the launch of off-plan developments we expect the district’s attractiveness will intensify in the near future.

Residential Apartments Average Sale Rates

During last quarter we witnessed sale rate increase in prime locations; JBR presenting the strongest rise with approximately 18% increase, similarly Dubai Marina’s prices rose by 11%, Jumeirah Lake Towers (JLT) by 8%, Downtown and Palm Jumeirah by 5%.

Hosting the internationally renowned Burj Khalifa, Dubai Mall and The Fountain, Downtown is a luxurious touristic district; this quarter it still presents the highest sale rates per square foot with numerous transactions recorded by Reidin.com in Burj Khalifa and the Address Hotels; the two most recent transactions that happened in March for a total price of 10 and 11 million respectively.

The constant enhancement of these communities aiming to provide luxurious properties and state-of-the-art amenities and facilities affects middle-income citizens who start moving to more affordable districts offering high growth potential and yield. The significant demand rise reflects in the overall number of sale transactions in these areas where constructions are going on and new projects are regularly launched. Jumeirah Village presents the highest percentage change quarter-over-quarter (22%) before Dubai Sports City, Discovery Gardens, International City and Dubailand.

As for International City it keeps its appeal thanks to continuous rent increase ensuring high return on investment to end-users and investors.

Apartments Transactions

Residential Apartments Average Sale Rates

Dubai Villas - Residential Market Outlook

The villa market decelerated during the last quarter, Roots Land recorded fewer enquiries for completed compared to off-plan developments and less sale transactions due to the market’s large supply, most of the latest project completions being villa communities. In the future we expect supply will expand as numerous off-plan projects were launched during this quarter or will be released to the market shortly.

In the majority of the villa communities sale rates have risen last quarter; year-over-year Al Furjan presents the highest increase followed by Springs, Meadows and Palm Jumeirah.

Villa Transactions

Villa Average Sale Rates

Dubai Residential Market Outlook Forecast

Recently the strength and confidence of the UAE on an international level were proven by Nu Skin, Chinese company producing personal care products and dietary supplements, that gained international renown after taking the decision to reward 16,000 employees by sending them for a ten day vacation in Dubai, Abu Dhabi and Sharjah requiring 77 flights, almost 40,000 hotel rooms spread in 40 hotels, and 409 tourist guides.

The city’s fast growing population mainly relies on new Expatriates; the current and expected strong performance of the UAE economy along with the security and stability of the country attract multinationals to open branches and offices in the country and motivates entrepreneurs in creating new businesses requiring professionals to run their business. Moreover the current European debt crisis and the Arab spring impacted countries encourage people to relocate their companies to the UAE. In the mid and long term the market will therefore require new supply to accommodate UAE Nationals and Expatriates.

Lately we observed that most of the new projects are high-end products; however we believe it is important to provide budget friendly homes to middle-income inhabitants. Affected by the rise of property rent and sale rates middle-income citizens already started moving to the outskirt of Dubai and might start considering leaving the Emirate for farer but more affordable areas such as Sharjah and Ajman.

Furthermore the new mortgage cap introduced in December 2013 increased the eligibility’s criteria for loans, making it more difficult for middle-income citizens to buy mortgaged properties. The off-plan developments and their different payment plans capture these end-users’ interest and provide them with different options. The developers, especially the master developers, have built their reputation and proven their reliability through the quality of their projects and by releasing the properties within the communicated completion date.

By 2016 the market expects to add approximately 50,000 properties to its current supply; however this number is subject to project completion within their scheduled timeframes. Of the total new supply that will be brought to the market by 2016 15% is expected to be villas while 85% will be apartments.

Dubai Commercial Market Outlook

The commercial segment continues its recovery especially in business districts such as Business Bay, JLT and Tecom. The past quarters showed higher overall occupancy levels and larger level of supply maintaining fair rental pressure, subject to 5% increase during the last quarter. In the near future we expect the commercial market to continue its growth strengthening the demand.

Dubai’s international place as a business hub reinforced by the Expo 2020 bid win and the ongoing master developments such as Dubai World Central should encourage multinational companies in opening offices in the UAE, creating approximately 200,000 new jobs and reinforcing Dubai’ s commercial segment.

Office Space Average Sale Rates