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CITYSCAPE GLOBAL – DUBAI REAL ESTATE ROUNDUP

September 2015
Dubai’s real estate market continues to perform, in line with the UAE’s overall aim of creating a resilient, regulated, real estate economy. Whilst a slowdown in the majority of asset classes has been recorded, analysts largely agree that these are signs of a market correction rather than a downturn.

JLL’s Craig Plumb comments, “We expect transaction volumes and subsequently sale prices, to drop further in the second half of the year. But the single digit price correction we saw in the first half of the year is a sharp contrast to declines we witnessed in 2008/2009 and is a clear indication that the market is maturing.”

With a highly diversified economy as a result of substantial investment into areas such as tourism, hospitality, financial services and retail, the global drop in oil prices has had a relatively reduced impact upon Dubai’s overall economy. The IMF reports a moderate outlook for the remainder of 2015 with the non-hydrocarbon economy posting positive growth in 2016.

Nonetheless, it is important to address the questions that have been raised as to the commercial viability of investing in Dubai, with some commentators interpreting slowed/stagnant growth rates more negatively than others.

Residential
The total number of residential properties in Dubai grew to 379,000 after 1,200 new units were delivered in Q2, with a further 16,000 units expected by the end of the year. As investment opportunities in the Emirate continue to grow, the overall real estate industry is showing signs of maturity as long term investor security and investment value become the focus of the market. Whilst Q2 saw some regression in various core markets, the figures are significantly more corrective as opposed to defining.

Commenting on the Dubai Land Department’s (DLD) annual report which published that total real estate transactions in Dubai hit $35bn in H1 2015, Sultan Butti Bin Mejren, Director General of the DLD, stated that, “the report confirms beyond any doubt that the real estate sector in Dubai is heading towards sustainable growth.”

Dubai Municipality recently unveiled the introduction of mandatory affordable quotas for new residential housing projects. As the market continues to develop, it is likely that Dubai will see more and more lower to middle priced developments being introduced in order to cater to a growing, employed, population with aspirations of home ownership and a better quality of life.

JLL’s Q2 report notes that the rentals market continues to out – perform the transactional market and for long term investors this means stability and a market that is becoming ever reflective of other long established real estate economies.

It is important to highlight that there was a 69% decline in the number of residential transactions registered with the DLD between 2014 and 2015, however, the fact remains that H1 2014 was a significant ‘boom’ period for Dubai, and that such a decline comes with the inevitable periodic adjustment a market faces with the existence of over – valued assets, as was the case in 2014.

“We must understand that Dubai is experiencing a normal market correction which was always inevitable,” said Wouter Molman, Director of Cityscape Group.

“The Expo 2020 win caused a sharp rise in property prices at the end of 2014, but the steps taken by the government have helped regulate the market and the establishment of a rent index has created more clarity for investors – all signs of a maturing market.”

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