Dubai residential market poised to recover in 2017

Dubai / Emirates Business

dubizzle, the UAE’s leading property platform, released its first property report in collaboration with JLL, the world’s leading real estate investment and advisory firm. The report, launched at the second edition of The Exclusive Agency Club (TEAC) event, provides insights and trends in the Dubai residential market, predicting a gradual upturn in residential properties in 2017.
dubizzle and JLL have joined forces and shared data primarily to drive forward transparency in the UAE property market, in order to empower buyers, tenants, investors and agents to make informed decisions and play a role in creating a sustainable knowledge-sharing market.
Data from dubizzle, JLL and other market sources shows the level of both sale and rent prices in Dubai has fallen over the past year but has now started to stabilise as the market reaches the bottom of its current cycle. The report foresees that the market will recuperate next year, based on the expectation that Dubai’s economic growth will be marginally higher in 2017 than in 2016.
The first co-authored report revealed that the Dubai residential sector is likely to experience sustainable growth in supply, with the year-on-year increase in residential supply from 2017 to 2019 expected to average 4% per annum, compared to an average of 3% per annum in previous years. As in previous years, there are far more projects announced than are likely to be delivered, with the materialisation rate likely to remain low as many announced projects have not commenced and those that have commenced experience delays.
With 1,600 units estimated to be completed in Dubai South by 2020, more residential projects are expected to be announced in 2017, as preparation for Expo 2020 gains momentum.
The modest improvement in performance in 2017 is predicated on several factors: increased investor confidence as they recognise that the market is close to its cyclical trough; improvements to the regulatory environment and increased transparency in the market; the gradual recovery of oil prices; continued government investment in hospitality, aviation, healthcare and other growth sectors; and increased employment and construction activity in the lead up to Expo 2020.
Data from dubizzle suggests that the mid-market sector has seen a more modest decline in sales price per sq.ft (-2%) than the premium housing communities (-6%) over the past year. Al Furjan apartments were one of the few property types to experience an increase in sales price per square feet of 3 percent. Jumeirah Village Triangle villas saw an increase of 1percent. Both now selling at approximately AED 985.5/sq.ft.
According to Ann Boothello, Senior Product Marketing Manager for Property at dubizzle, “We expect that most of the upcoming residential projects will be in the form of apartments, where even, the newer communities such as Al Furjan, once perceptive as a villa community, will grow to offer more apartments within the mid-market segment in the next few years. dubizzle search volume data highlights an increased popularity amongst online property buyers in more affordable and mid-market communities like Al Furjan, JVC, JVT and Sports City; where JVC received 9.7 million searches for properties by dubizzle property seekers in the last quarter alone.”
The greatest threats to the anticipated recovery in 2017 would be a further slowdown in the Dubai economy or a major improvement in the materialisation rate, which could lead to oversupply. With over 11,000 units currently scheduled for delivery in the final quarter of 2016 and more than 30,000 units under construction for planned delivery in 2017, there is definitely the potential for oversupply if all these projects progress on schedule.
In addition, UK investment in Dubai real estate fell from 9% in the first half of 2015 to 7% in the same period this year.he vote to leave the European Union hascaused a sharp fall in the value of the GBP and hence lowered UK outward investment into Dubai, where prices are comparatively higher. Despite this, British nationals are amongst the top five nationalities contributing to property sales transaction volumes in H1 2016, the others being UAE nationals, Indian, Saudi Arabian and Pakistani.
Craig Plumb, Head of Research, JLL MENA, commented: “Developers have traditionally over estimated levels of completions of homes in Dubai, with only around 30 percent of all announced projects actually being delivered on schedule over the past few years. We continue to see developers phase out the release of units to dampen the opportunity for oversupply. However, it is vital that developers remain conscious of this concern as we draw closer to Expo 2020, which could see a lot of new projects unveiled.
“JLL’s latest Global Real Estate Transparency Index (GRETi), reveals that Dubai is already the most transparent market in the region but transparency levels remain behind those of more mature markets. There is a clear relationship between more transparent markets and inward investment and the Dubai government has recognised the important role that improving market transparency would have in attracting additional overseas investors to buy real estate here. This is the first time that we have collaborated with dubizzle to help provide investors with more insight and understanding and we look forward to continuing to champion efforts to increase data transparency,” said Plumb.
The co-authored property report breaks down the affordable and premium segments, property for rent and sale, and supply in the market. It also discusses the implications of Dubai’s legislations that safeguard various stakeholders within the real estate industry and argues why the city is an expat-friendly tourist destination and an optimal location for Foreign Direct Investment (FDI).