Tasweek Real Estate Marketing & Development, a property adviser and solutions provider in the Middle East, has noted improving confidence level on the UAE’s real estate sector starting in the first half of 2011, characterized by increasing investor appetite on high-quality assets as well as growing occupational activity as tenants take advantage of market opportunities. On its latest analysis on the UAE’s real estate market, Tasweek further revealed that there will be a mixture of increased albeit cautious local demand as well as foreign interest, mainly from Asia, for good quality real estate in the country, especially considering that the recent political uncertainty in the region had not affected the UAE, consequently reaffirming the country’s status as a safe haven.
In Abu Dhabi, Tasweek disclosed that all indicators point towards the maturity of the real estate sector in a positive way. This is subsequently shaping up fundamentals in terms of reasonable and justifiable pricing, facilities, amenities, project quality, infrastructure, mortgages or real estate financing, availability of real data, and location differentiation.
According to Tasweek, apartment and villa rents and sales in the UAE capital fell in the first quarter of 2011 as fresh supply continued to put downward pressure on rents. Freehold villa values in new developments such as Al Reef have seen a continuation of falling values from the previous quarter, though the private freehold market in upscale areas such as Al Raha Gardens and Golf Gardens have remained relatively robust, further creating a much wider range of opportunities for real estate investment in the emirate.
However, lower-market properties have suffered to an extent, as new supply outpaced tenant demand. Rental rates have seen an average drop of 6 per cent in the lower sector in areas such as Mohammed Bin Zayed City where, thanks to a continuous supply of new stock, one bedroom flats are now available for AED 50,000 per annum.
On the whole, an important factor that is contributing to Abu Dhabi’s improving real estate landscape is the hospitality sector, which has sustained stable occupancy levels and operating performance, leading to a positive growth trend starting in 2011.
Affordability and better quality living remain the top considerations of buyers and investors in Dubai’s real estate sector, where new supply in 2011 is lower compared to the previous year. Dubai’s strategic importance as a major business hub will likewise remain an important distinguishing factor for the local real estate sector.
Tasweek’s research revealed that in Dubai selling prices have seen an average drop of 6 to10 per cent in areas such as Downtown Dubai, Dubai Marina, Dubai Silicon Oasis and Discovery Gardens, while rental rates have seen an average drop of 7 per cent in areas such as TECOM, Dubai Marina and Jumeirah Lake Towers.
Accordingly, the UAE’s strategic importance in the GCC region and, by extension, the strategic importance of the region as a fast-emerging global investment destination will create a positive influence on real estate investment activity in Dubai.
Government initiatives to improve transport infrastructure over the last few years have also been crucial in sustaining investor interest. With the UAE government’s USD 11 billion Union Railway project, which will connect Dubai to all the emirates and lead to further integration, now underway, Dubai’s strategic, centralized location will further play an important role in driving interest and strengthening the emirate’s competitive edge as a favorable real estate investment destination.
TASWEEK CEO Masood Al Awar points out that “The real estate industry’s recovery may take a few more years given the immense size of the sector, although it can pick up if demand for properties increases against profitability, i.e. lower profit margins, lower returns and lower finance. This will require the implementation of a proper strategy that takes prevailing market trends into careful thought and positions industry players for long-term growth as the global economy bounces back”. Al Awar added that “the UAE still has over USD 45 billion worth of projects in the pipeline, with developers looking to diversify their property development projects to cater to a rising demand from overseas clients who are showing strong interest to invest deeply across assorted property sectors.
Availability of real estate financing is likewise contributing to the improving confidence level as majority of banks are now in a much stronger position to offer financing facilities. Moreover, demand for real estate has also been influenced by growing population figures, in addition to a significant increase in tourist footfall across the country”.