The strong real estate supply between 2014 and 2018 has put pressure on rental prices and property values in the UAE, particularly in Dubai and Abu Dhabi. Since the start of the downturn in oil prices in 2014, Al Roya has seen rents fall in Dubai and Abu Dhabi between 2014 and the middle of this year by an average of 26 percent, while property prices have fallen by 29 percent. According to consulting firm reports, Abu Dhabi rents fell 31.2 percent in the same period, while prices in Dubai dropped 34 percent, with Sharjah and Ajman falling close to 30 percent. Dubai real estate transactions have fallen by 11 per cent in the last five years from 2014 to the end of 2018, while the return on investment in the emirate’s properties has maintained levels close to 7 per cent.
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Since the start of the real estate downturn in mid-2014, falling prices have led to a decline in rents at an annual rate of 9 percent last year compared to 2017, while the investment return on Dubai property rents has stabilized at 2014 levels of around 6.86 percent.
In Abu Dhabi, rental prices fell 10.7 percent at the end of last year compared to 2017, while the return on investment in the emirate fell from 7.16 percent at the end of 2017 to 6.85 percent last year, and the return on investment in the five years from 7.03 percent in 2014. To 6.85 percent last year.
Real estate transactions decline
Dubai rents fell 5.2 percent in 2017, and Dubai’s investment return was 7.06 percent compared to 7.36 percent in 2016.
In Abu Dhabi, residential property prices fell 7.6 percent, while rents fell by 7.6 percent. Rent revenue shrank to 7.16 percent in 2017.
According to Dubai Land Department data, Dubai real estate transactions in 2014 amounted to AED 252.5 billion distributed over sales by AED 138.4 billion and mortgages by AED 104.2 billion and 9.8 AED 1 billion distributed among other actions.
In 2015, the value of real estate transactions in the emirate grew by 9.22 percent to AED 275.6 billion, coming from AED 129 billion of sales, mortgages of AED 126.8 billion and other transactions of AED 19.8 billion.
In 2016, the value of Dubai real estate transactions declined by 2.6 per cent to AED 268.6 billion from sales of AED 102.8 billion and mortgages worth AED 138.5 billion, and the rest from other property transactions worth AED 27.3 billion.
In 2017, real estate transactions in the emirate jumped to 284.5 billion dirhams with sales of 114.2 billion dirhams, mortgages by 137.35 billion dirhams and the rest of transactions by 33 billion dirhams distributed among other actions.
By the end of last year, Dubai real estate transactions had fallen by more than 21.2 percent to reach 224 billion dirhams divided by real estate sales worth 75 billion dirhams and mortgages by about 120 billion dirhams and the rest of the transactions 29 billion dirhams.
The emirate’s real estate transactions during the first half of this year were AED 113 billion, according to preliminary data.
In Sharjah, the value of real estate transactions in the emirate fell in four years by 11.7 percent by the end of last year.
In detail, the value of Sharjah real estate transactions reached AED 25.5 billion at the end of 2014, an increase of 44 per cent compared to 2013, and 62 new projects were registered in the same year.
In 2015, turnover dropped to AED 22.5 billion, while 18 new projects entered, with turnover rising to AED 24.7 billion, up from AED 29.8 billion at the end of 2017, to AED 22.5 billion at the end of last year.
Sharjah real estate transactions during the first half of this year amounted to about 14.7 billion dirhams.
Haider Tuaima, Head of Real Estate Research at Real estate consultancy firm ValuStrat, explained that UAE real estate, especially in Dubai and Abu Dhabi, entered the corrective cycle from mid-2014 on the back of falling oil prices in Abu Dhabi and the indirect impact of Dubai real estate on the movement of oil prices.
Tuaima said that the vacancies that touched the Abu Dhabi real estate sector resulted from the suspension of the abolition of many positions in the emirate by oil companies, especially as real estate, whether villas or apartments were rented at high prices.
He added that the increase in vacancies has increased the supply in Abu Dhabi, leading to the recent decline in the prices of apartments and villas, whether rents or sales.
He pointed out that Dubai real estate was affected by what happened in the oil market, pointing out that the decline of Dubai real estate has no automatic relationship with oil prices, in 2012 and 2013 oil prices were above $ 100 a barrel, but the rent prices were falling.
He pointed out that the rise in the exchange rate of the dirham in line with the rise of the dollar, increased pressure on real estate, where the cost of buying property for investors from abroad, at the same time registration fees rose from two to four percent in Dubai, in addition to limiting the proportion of mortgages by about 75 percent of residents, leading to some people reluctant to buy real estate.
He pointed out that the real estate market in Dubai gave positive indicators during the first half of the year, manifested in the rise in the behavior of Dubai real estate, including sales on the map.
He stressed the importance of the steps taken by the government to support the local economy, which is expected to have significant effects on real estate in the coming period.
For his part, said the CEO of Biot. However, despite the downturn, property prices continued to attract many investors of different nationalities in view of the good return on investment.
He added that Dubai’s real estate market is competitive and property owners should make every effort to promote and attract new investors.
Commenting on the performance of Sharjah and Ajman properties, Khan explained that the real estate market in Sharjah and Ajman is flexible and meets the requirements of buyers with abundant prices and competitive rents for real estate units.
He pointed to the good performance of Sharjah and Ajman properties in line with the real estate track in the emirates of Dubai and Abu Dhabi, pointing out that the two markets are also characterized by the abundance of supply of various properties, especially residential.
He predicted that this year will be a positive year for the real estate market in the country as a whole, where real estate actions record increasing traffic in various types of real estate, as well as the entry of new investors to the market.
Cancellation of fees stimulates the market
Real estate broker Raad Salman said that there are several factors that are expected to be a real catalyst for the real estate market to rebound to the highs such as the expiration of the Expo Dubai 2020, where it will play a positive role in reviving the real estate market, and increase the movement of economic activity and attract more tourists and new residents.
He explained that the package of reductions and facilities provided by the Ministries of Finance and Economy to reduce and cancel about 1500 fees, in addition to the incentives provided by various economic circles in the country top the list of catalysts and incentives, which eased the financial burden of companies.
He pointed out that various real estate developers in the country have provided large and flexible facilities for payment plans by banks, companies and real estate developers for projects that are still under construction or on the scheme.
Salman pointed to the companies’ plans to attract investors through the repayment facilities that extended for twenty years, which is the first of its kind in the state real estate market, in addition to repayment periods of eight and ten years after delivery.
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