When to buy?
The UAE real estate market’s pace of development has been quite incredible in recent years.
Overall, sales prices of apartments and villas in Dubai weakened by 2% and 6%, respectively. Softening demand due to the economic uncertainty combined with the excess supply of residential brought further correction of the prices during Q4 2017. However, the volume of ready units transacted rose in Q4 compared to the previous quarter. Nonetheless, off-plan transactions dominated the market with Dubai Marina emerging as the most transacted community while Emirates Living ranked first in terms of transaction values.
Anyone with an eye on the real estate market in the UAE over the last few years cannot fail to have noted the pace of development, and I don’t just mean from a physical development perspective but from the point of view of regulatory changes and the impact of economic influencers.
It’s certainly been an interesting period as we have seen the market continue to mature, adjust and react to domestic as well as external global factors.
Looking back, property sales values and transactions have declined over the past 18 months since the government introduced the necessary cooling measures to reverse sales prices from overheating following the announcement of Dubai’s successful bid to host Expo 2020 as well as due to general concern regarding the uncertain economic outlook exacerbated by continued low oil prices.
With substantial supply due to be handed over in Dubai throughout 2016, both sales prices and rental rates in the city are expected to come under increasing pressure in the coming months.
This will invariably be affected by the addition of 22,000 apartments and 7,700 villas, due to be handed over this year, but, nevertheless, the real estate sector in Dubai continues to offer attractive post tax returns to investors looking more long-term, especially when compared with other global cities.
The trend for falling prices in Dubai began in 2015 and year-on-year figures showed a decline in apartment sales prices of 8% and villas by 11%. This is expected to continue during the course of 2016, albeit at a more moderate pace as rates in several developments have already declined sufficiently to encourage the conclusion of transactions.
Last year’s price softening has been welcomed by prospective investors eager to get a foot in the door or add to existing portfolios, and it has also allowed the market to catch its breath and regain investor confidence in its long-term prospects and the value offering when compared to other global property hotspots.
Dubai’s rental yields are currently averaging just over 7%, which is extremely attractive when compared with cities such as Hong Kong, which offers just 2-3%, and London at 3-4%.
In some parts of Dubai, the yield can be as high as 10% for prestigious developments on Palm Jumeirah, for example, with hotel managed apartment units at DUKES Dubai and Anantara developments representing sound investment potential.
While we have seen a cooling of sales prices, the rental market has remained broadly robust, thus contributing to a climate of solid yields for rental properties in select areas. The reality is that residents still need somewhere to live, and when coupled with the forecasted increase in the local population as we edge closer to 2020, with more people coming in as the Expo build-up continues, this means that renting remains the first choice for the majority of newly arrived residents.
There are several motivated and serious sellers in the market place, especially in the case of vacant land and bulk inventory, which presents an opportune time to buy.