More the merrier: Supply overflow benefits buyers
The sight of a ‘to let’ board on every second building in your vicinity should prompt you to check out on properties you earlier thought were not within your reach. The options are wider and plentier, and perhaps is the right time to move into a bigger and better pad. The trend is not only for the leasing of apartments but for the resale of properties too.
Srinivasan Padamanabhan, business manager for mortgages at Mashreq Bank, said: “This is the best period for consumers as the property sector has turned into buyer’s market as available options are indeed vast. The ticket size is lesser compared to previous years – around 25 per cent less. The situation has instilled buyer’s interest and it is evident from our portfolio that comes from a first sale [developers ] and from resale [consumers], even today. Consumers are venturing into exploring property buying, going forward by 2020, we expect prices to stabilise as projects will be delivered.”
The optimism is indeed evident as Farhad Azizi , chief executive officer of Azizi Developments, said: “Our outlook for the property sector is positive, which is reflected in the strong investor response to all our launches. We have several handovers scheduled this year and new project launches that leverage the positive dynamics of the market.”
The property sector of the UAE is robust, driven by strong economic fundamentals. With the UAE economy projected to grow over 3.5 per cent according to the Capital Economics’ Mena Economic Outlook, and the continued growth in tourism that led to Dubai welcoming over 15.92 million visitors last year, the nation is a strong global business and leisure hub that has earned the trust of international investors.
According to the Dubai Land Department, the first nine months of 2018 recorded real estate transactions worth over Dh162 billion through 27,174 investments by 21,605 investors of 163 nationalities. In the last 10 days of the year, over 2,081 transactions were conducted valued at Dh19 billion. These figures are strong indicators of the inherent strength of Dubai’s property sector, made even more attractive with the participation of international investors. These factors played a fundamental role in increasing market confidence in the property sector.
The approval by the UAE Cabinet to grant 100 per cent ownership of non-free zone businesses by foreign investors; the decision to grant 10-year visas for investors and professionals; and the law that grants retirees over the age of 55 to benefit from longer residency visas will be significant catalysts in encouraging investors to purchase property in Dubai, not only to live in but also as long-term investments, boosting market confidence.
Banking on Expo 2020
Everyone is banking on Expo 2020 Dubai as demand is expected to escalate with the growing number of visitors. Azizi said: “The demand for property is expected to surge in anticipation of Expo 2020, as it will catalyze the economy. This global event is set to welcome more than 25 million annual visitors who will have the opportunity to appreciate the world-class lifestyle that Dubai offers.”
“It will lead to an influx of investments. Furthermore, with a number of professionals arriving in Dubai to support the preparatory work, demand for quality homes will increase. The value-added that we offer to investors – including attractive payment plans and elegantly designed residences in fully-integrated neighbourhoods – will appeal to investors.”
Investors are eyeing the property market and opportunities stemming out of it. The positive growth in the number of international investors in the UAE – as reported by the DLD – highlights the steady demand for property.
According to the DLD, real estate transactions so far have reached more than Dh12 billion, including Dh5.9 billion from land-selling deals. It’s notable that 1,264 UAE investors led all other nationalities with a total of 1,587 transactions worth Dh4 billion. Indian nationals (1,387 investors) are second with Dh3 billion worth of investments through 1,550 transactions. Saudis were third with almost Dh1.3 billion, followed by those from Pakistan, the UK, China, Egypt, Russia, Jordan and Canada.
This growth is not driven by a property glut but by the strong prospects that Dubai’s realty sector offers in terms of long-term returns and rental yield. Moreover, the DLD played a pivotal role in creating trust in the marketplace by planning, organizing and evaluating operations related to real estate licenses, as well as the organization and development of real estate activities and its commitment to monitoring projects, financially and technically, to protect investors.
However, Lynnette Abad, director of data and research at Property Finder Group, cautions and says there was a 27.7 per cent decrease in off-plan transactions last year could be due to the fact that the global market is in a recessionary phase which could affect the amount of investment that is attracted locally. Additionally, developers added 29,947 new residential units to the market last year, which could affect prices. While the average gross yield for property in Dubai is still much higher than most other countries in the world, investors are looking for less risk right now.
Abad opines that Property Finder’s research accounted for just under 200,000 residential units, an average of 39,945 units per year for expected supply from 2019 through 2023. With lower demand to match that, prices will ease further. However, decreasing inflation is something attractive for both residents and potential residents. While investors will have to grapple with lower returns, a continued correction in inflated property prices will help to stabilize the market and allow for maturity.
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