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By Sunil Kumar Singh
January 10, 2016 | 16:40 | Dubai
Subdued economic activity, sluggish investor sentiment and restrained demand — will 2016 go the same way for Dubai property market as 2015 did? This is the big question that’s baffling Dubai real estate investors. Last year, residential prices in many areas of Dubai either remained stagnant or flattened. Will 2016 by any different and should investors expect further moderation in prices at least in the near future or, on the contrary, can they expect upward move?
According to Dubai Land Department’s (DLD) annual report for 2015, released today, the total amount of real estate transactions recorded in the emirate last year exceeded AED 267 billion, through 63719 transaction, showing an 8% increase compared to last year and that the sales acquired 49% of the total. The report reveals that the sales crossed the 48,000 transaction with a total value of AED 130 billion, while mortgages crossed 12,000 with a total value of AED 117 billion. Sales and mortgages relating to land transactions recorded more than AED 194 billion from the total real estate figure for 2015, with the total of 16,751 transactions. Market experts however stay cautious as they say lower crude oil prices could have some negative impact on the capital flows into Dubai real estate sector in 2016. According to a latest research report from JLL, lower oil prices are leading to a fiscal restructuring across GCC’s hydrocarbon economies, which involves both reduced government spending and increased government revenue through taxation. This scenario will have various implications for real estate investment both in the region and globally.
In fundamental terms, nevertheless, Dubai realty sector look solid, say experts. “The fundamentals of the real estate sector in Dubai are strong. Taking into account the continuous growth of the city and the number of residents – it is typical for the supply versus demand of housing units to fluctuate. Therefore, we don’t expect a major concern in that area,” said Srinivasan Krishnaswamy – VP Business Development & Strategic Planning at Dubai-based developer Deyaar Development.
While rentals might see short term pressure due to oversupply, experts say the next stage of growth Dubai’s property market will be led by two key factors: affordable houses and the rising population in Dubai that would keep demand for accommodation persistent.
“The shift to affordable homes, a key priority for developers, will help address the needs of a large cross-section of middle-income professionals, who are seeking to shift from a rental model to an owned-home lifestyle,” argued Ranju Kapoor, General Manager, Hamptons International.
“We predict that investors will focus more on the affordable market segment in fully established, secure and family-friendly communities that offer a full range of facilities and amenities. The demand is growing and supply has yet to catch up. We expect prices to continue to hold strong and increase for such developments that are ‘aspirational’ addresses,” he added. A number of developers have already stepped into this untapped segment and have announced affordable housing projects that is likely to stoke their demand.
Overall, as UAE-based property portal Bayut.com says, despite some negativity in the air, the UAE’s real sector has survived a rather tough year with great resilience. The sentiment across the market remains largely positive. Although there have been pockets of turbulence in the sale market, the strength of rental returns is still attracting buyers who plan to undertake a buy-to-let decision. With average residential rental returns well above 7% and beating the likes of London and Hong Kong, Dubai promises a more-than-decent return on realty investment, revealed Bayut.com’s statistics. The year 2016 looks set to witness the initiation of a number of projects leading up to Expo 2020, and they are likely to help reinvigorate both real estate and business activity. With the population continuing to grow in number, the seemingly excessive unit supply could fall short of meeting the demand.