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There is the concern about subdued sentiment in Dubai’s and the overall UAE’s real estate market. What is your assessment?
The real estate market is currently going through a correction phase and with the exit of market speculators due to the legalization of the financing system by the authorities and the presence of real estate investors in the market has strengthened. Home prices fell this year and growth has remained modest due to the prolonged period of low oil prices experienced across the region along with the level of supply in the current market. Additionally, since the local currency is pegged against the dollar, which has remained strong by global standards, the UAE’s real estate sector has become increasingly expensive for international investors; many of whom earn in currencies that are devaluing.
However, the UAE’s residential real estate continues to attract investors from liquid markets such as Saudi Arabia and India, who have historically been the top buyers in the country’s market. Furthermore, the overall sector is expected to receive a significant boost from the UAE’s government’s infrastructure projects in preparation towards Expo 2020. The increased activity from developments such as the Route Metro 2020 and Dubai Parks & Resorts will generate more confidence in the market and draw a higher volume of inward capital.
From a developer’s point of view, companies such as ourselves will have to plan their projects according to the markets requirements and be aware of how much supply is already available and accordingly plan residential projects based on pragmatic expectations of demand. By developing prudent strategies with this approach, Manazel has been able to remain profitable, reporting an AED 31 million net profit in H1 2016, despite the market slowdown. Additionally, we have also been able to avoid significant delays on our projects, which we are committed towards delivering to investors in a timely manner.
How Brexit is going to impact Dubai and UAE residential real estate sector?
The Brexit has resulted in a greater degree of uncertainty amongst Eurozone investors. Property buyers from the UK will face some negative effects due to the devaluation of the British currency following the vote. However, a vast majority of British real estate investors work and reside in the UAE will not be impacted by this as their income is not in Pounds. Although the negative sentiments surrounding the Brexit might slightly delay market recovery, the UAE’s property market is expected to experience a positive turnaround by early 2017.
Is Dubai property market turning more towards renters’ and buyers’ market given the softening rentals and sales?
Market sentiment is one of the most important factors which determine the volume of sales across all of the UAE’s real estate segments. In country’s residential market, expats are most likely to continue as tenants instead of becoming landlords. Hence, real estate sales to individual investors are bound to be more challenging in the home ownership market than in the rental market.
Where do you see the UAE property sector now and going into 2016 and 2017?
Demand for residential units in the country will likely stay at similar levels over the remainder of the year, with prices levelling out by the end of 2016 before gradually increasing in 2017. Oil prices, geopolitical instability, currencies valuations, government spending and investor sentiment are the leading factors which will influence demand for property.
One of the UAE’s biggest advantages is its globally renowned ability to attract private high net worth individuals, which automatically leads to investments inflows from both the region and across the world. Despite softening demand and growth over the past year in the national real estate industry, the sector’s overall performance is still robust as a long-term investment option.
A large number of residential projects were launched over the past 18 months and a lot of deliveries are expected in 2017, including Manazel’s Al Reef 2. Around 10,000 units are expected to be completed by the end of 2016 alone; with an increase in affordable residential options. Since there will be more handovers over the coming year compared to the previous 12 months, an increase in sales and payments for residential units is what developers are anticipating. Hence sales prices for these projects are expected to remain steady although rental prices might decrease.
Current trends and projections strongly suggest a shift in market demand towards more affordable residential units. Manazel’s core business strategy is built around targeting this middle-income sector in the UAE, which remains underserved, through our residential and retail projects which will continue to offer affordable options to expats and foreign investors for years to come.