Is the real estate sector in the UAE in recovery mode?

June 14, 2018 3:35 pm


Stunning houses, skyscrapers, and mansions are what we picture in our heads when the UAE comes to our minds.

The real estate sector is undoubtedly a significant pillar of the economy and a main source of diversification in the UAE.

The UAE’s 2017 Annual Economic Report shows that the real estate sector contributed to 10.3% of the GDP, in comparison with 16.7% for the oil and natural gas sector.

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However, while some consider that the sector is growing, others are more skeptical.

Price drop

According to a local daily, only 17,000 out of the 32,000 units scheduled for completion in 2018 saw the light of day in the UAE, driven by the unpredictability of the market.

Real estate prices are decreasing due to oversupply in the off-plan sales market and low demand from both investors and consumers, a mix of wariness and over supply of real estate projects, according to reports.

“Dubai rental rates will continue to decline in 2018 following a challenging few years, with yield compression expected across residential markets in particular,” according to the latest report from the consultancy Core Savills.

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“Further to rental declines, the ongoing strength of the US dollar and the imminent, albeit probably limited, inflationary effects of the introduction of VAT in the emirates are all expected to compress investment yields,” the report said.

The report also highlighted numerous challenges to Dubai’s real estate market, as rental demand remains muted and prices continue to fall.

Looking ahead

According to The National, a media outlet, despite forecasts at the end of 2017 that the market would bottom out this year, most experts have changed their tune as prices continued to slip in the first quarter of 2018.

Recovery is not expected until 2019, according to several reports published recently.

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CEO of Bayut.com, Haider Ali Khan, said: “As more and more off-plan projects are completed in 2018, handed over and put on the secondary market, we can expect prices continuing to attract investors while landlords will have to stay competitive to entice potential tenants. In the long run, as the market and the broader economy move on a trajectory of diversification and maturity, the opportunity for developers and sellers to capitalize on their investment remains strong.”

Alkesh Sharma
By Alkesh Sharma



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