Recent geopolitical developments on the regional front and new residential legislation in Dubai – with a prime focus on affordable housing – are both likely to impact the emirate’s property market, according to leading international real estate consultancy, Cluttons.
The geopolitical changes across the region are set to draw attention to the UAE and Dubai, in particular, from regional investors seeking an investment safe haven, stated Cluttons in its Dubai Winter 2017 Property Market Outlook.
The report also welcomes the Dubai government’s recently announced plans to legislate, through planning, the provision of affordable homes in some of Dubai’s core locations.
Faisal Durrani, the head of research at Cluttons, said: “Overall market conditions in the emirate have been relatively healthy. Going forward, we see regional developments and local legislation playing a big part in Dubai’s property market.”
“We believe that Dubai Government’s initiative to focus on affordable housing is extremely positive and is a watershed moment for the emirate. The change will help Dubai avoid some of the lessons learned by more developed cities around the world, especially with regards to curtailing the emergence of poorly connected, low income neighbourhoods that are segregated from the rest of the city, as is the case in many other global metropoles,” stated Durrani.
“While exact details around the legislation are yet to be confirmed, we expect to see a balanced approach between the presumed establishment of quotas around the provision of affordable housing that is both built-to-rent and built-to-sell, so that both aspiring buyers and tenants, priced out of city centre locations, can benefit,” he added.
On the residential market, Cluttons said overall prices slipped by 1.9 per cent in the three months to the end of September, following on from the 1.5 per cent drop in Q2.
The annual rate of change at the end of Q3 stood at -5.6 per cent. Villa values experienced their weakest performance in almost two years, with prices falling by 2.8 per cent in the three months to the end of September.
Apartment values on the other hand experienced a drop of 1.3 per cent on average, taking the change during the first nine months of the year to -5.5 per cent. No submarket registered growth during Q3, said the Cluttons report.
Murray Strang, the head of Cluttons Dubai, said: “These markets, in particular, have faced competition from surrounding developments that are newer, cheaper and often more affordable, especially for those looking for rental options.”
“Arabian Ranches has faced stiff competition from nearby Nshama, while Al Furjan and the second phase of units at DIP have improved the amount of choice for would-be buyers and investors in the Jebel Ali area,” noted Strang.
According to Cluttons, transaction volumes remained relatively stable, with the number of deals during the first nine months standing 4.6 per cent higher last year. The volume of villa deals however slipped by 1.6 per cent over the same period to 874 between January and September 2017.
The supply pipeline on the other hand continued to strengthen, with nearly 30,000 units announced during the three days of Cityscape Global in September, it stated.
Durrani pointed out that a total of 79,738 units are likely to be completed over the next three years.
The corresponding growth in population, which usually averages 5 per cent per year, should see a further 441,000 new people added to the city, he stated.
According to the Dubai Statistics Centre, the average household size in the emirate is 4.2 family members, which would translate into demand of roughly 105,000 units over the next three years.
“While it may appear that supply and demand are well matched, particularly as 30 per cent to 40 per cent of the announced supply is likely to be delayed, or rephased, as has been the case historically, our concern remains centred on the fact that the vast majority of planned supply is designed to cater to the high-earning segment of the population,” he added.
On the office market, Cluttons said it remained very stable, with 13 submarkets monitored seeing no movement in headline upper limit rents during the last year.
Paula Walshe, the head of corporate international services, said: “Dubai’s office market has been far more resilient than its regional peers, owing to the diverse nature of occupiers, which of course is linked to the emirate’s heavily diversified economy.”
“With the market remaining fragmented and the impending introduction of VAT, office rental rates have held up reasonably well in many submarkets,” he noted.
According to the report, outside DIFC-owned stock, beyond core DIFC buildings, rents have shown some weakness, although where vacancy rates are sub 5 per cent, they have held up reasonably well.
“We expect the completion of Gate Avenue in spring 2018 to enhance the attractiveness of many of the more competitively priced peripheral buildings which will now be connected into the amenities around the DIFC core. This has prompted developers to move forward with plans to bring forward new space, such as the $1-billion ICD Brookfield Place, which is due to complete in roughly 18 months’ time,” stated Walshe.
“The building is positioning itself as the next generation Emirates Towers, offering unrivalled amenities and facilities that are expected to aid its pre-letting,” she added.
The technology-media-telecoms (TMT) sector remained amongst the most active, the report highlighted.
Cluttons believes the resilience showcased by Dubai’s office market will persist as the end of 2017 approaches.
“Next year is also expected to be another stable one for the city’s office market, for the most part, with any declines likely to be contained at 4 per cent to 5 per cent at most,” revealed Strang.
“The main upside risk for the market remains the impact of the Expo 2020 and the potential of the mega event to create fresh demand for office space as companies expand, or set up shop in greater numbers across the emirate to help deliver the ambitious construction and infrastructure projects in the run up to the event,” he added.-TradeArabia News Service