In the beginning of 2018, it was announced that the two largest real estate companies in the country Emaar Properties and Aldar Properties, they may have accelerated the market in the short term, but the recovery in real estate prices in UAE remains a long way off.
Despite forecasts at the end of 2017 that the market will be bottom out this year, most experts have changed their tune, as prices continued to fall in the first quarter of 2018. According to several reports published this year, the renovation is now not expected until 2019.
“Challenges of excessive supply, supply and demand mismatches, weakening demand in sectors such as office and retail and a relatively lower level of household income growth testify to market pressure,” announced real estate consultant for Core Savills in Dubai.
The industry faced a number of challenges in 2017, including low oil prices, a population awareness of the budget for accessibility and widespread consolidation of businesses, leading to a reduction in office and housing needs, this forced landlords to lower rent, creating “tenant’s market”.
The demand for an “affordable” off plan flat has remained relatively strong, with a total of 6,000 housing units delivered in Dubai in 2018, and another 15,500 units are expected for the rest of the year, Core Savills said.
However, in Dubai’s sales market, this “cascade” of new stocks pushed demand far from traditionally sought-after areas such as Downtown and Dubai Marina, this postponed the recovery in sales prices.
In these two areas, sales prices for the year last year fell by 7.5 per cent and 6.6 per cent in the first quarter.
In Abu Dhabi, sales prices fell 7.9 per cent year-on-year in February and 1 per cent compared to month-on-month, while oil prices fell 10 per cent year-on-year, market analyst Reidin said in March housing stock index.
As for new projects, developers continue to focus on the middle income sector. The compensation for housing resources is directed in line with the change in business activity, and therefore the desire of the population for larger tickets are still low.
The largest available scheme this year was Aldar’s Dh10 billion Alghadeer Master plan, a community of 3 million square metres with 611 homes in the first phase. Aldar estimated Alghadeer units “aggressively” in response to market conditions, his chief executive Talal al Dhiyebi said in April.
One of the properties to be purchased is Saadiyat Grove, one of the first two projects being developed through Aldar’s partnership with Emaar located in Dubai, whose goal is to develop potential projects worth Dh 30 billion in UAE in the coming years.
The situation does not look good as well for another contractor in Dubai, Damac Properties, whose net profit fell by 45 per cent in the first three months of 2018, this is attributed to rising sales costs outside the plan, which fell 27 per cent year-on-year.
In the meantime, the Department of Land in Dubai is taking steps to streamline real estate transfer procedures in order to reduce costs for investors. It has plans to create a “smart” digitised platform called “Real Estate Self Transaction” (Rest), which will eliminate the need for paper documentation for a sale and rental transaction by 2020.
Aldar Properties in Abu Dhabi and Emaar Properties in Dubai, two of the UAE’s largest real estate developers announced a strategic alliance and created a joint venture (JV) worth AED30bn ($8.1bn).
An agreement was signed between Aldar chairman, HE Mohamed Khalifa al Mubarak and Emaar chairman, HE Mohamed Alabbar to formalise the partnership.
Two developers will initially jointly develop the Emaar Beach Front in Dubai and Saadiyat Grove on the Saadiyat Island in Abu Dhabi. This is the largest joint participation in the real estate sector in the United Arab Emirates that will transform the horizon of the United Arab Emirates and further strengthen UAE’s status as a major tourist destination.
The alliance is intended to increase investor confidence, analysts said at the time. “
Such partnerships will continue to show real estate market rising in UAE, and investment growth from recognised developers is well suited to future prospects, as it provides a degree of confidence for investors,” said Taimur Khan, analyst in Dubai.
The Alliance will initially focus on two projects in UAE, Saadiyat Grove in Abu Dhabi and Emaar Beachfront in Dubai. Saadiyat Grove, a mixed use, will be located in three museums, 2,000 residential units, two hotels, 400 serviced apartments and 130,000 square metres of experiential lifestyle and sales space. It opens in 2021.
Another mega project — Emaar Beachfront — in Dubai is a private island that will have 7,000 residential units with access to a 1.5km private sandy beach. Situated between Jumeirah Beach Residence (JBR) and Palm Jumeirah, the project has direct access to the road by Sheikh Zayed and Marina Dubai.
Stefano Virgilli
stefano@virgilli.com
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