The 971 Report

UAE real estate to see a return to confidence?

The UAE’s real estate market is expected to see a return to confidence in 2013, as economic growth and employment continue to improve, a new seven-point report by market advisors Jones Lang LaSalle has revealed.

The sixth annual edition of the report, ‘2013 Top Trends for UAE Real Estate’, predicts that there will be increased investment from East Asia and the Global South, with specific interest from China and South Korea due to greater business cooperation with the UAE.

But it goes onto warn that with an increase in the availability of property, both the rental and buyers markets are expected to see constraints on the overall performance of the UAE’s real estate sector, possibly offsetting the positive impact of improved market sentiment.

[Related: UAE c.bank won't impose mortgage caps-governor quoted]

THE FULL JONES LANG LASELLE SEVEN-POINT REAL ESTATE KEY TRENDS 2013 REPORT:

  1. Return of confidence to the Dubai market: Factors like the UAE’s economic growth, increased employment, Dubai’s safe haven status and improved price/rental performance have led to continued market confidence. With many real estate project announcements over the past six months, this increased market confidence has become more pronounced. The government is keen to create a more stable market environment as illustrated by the new mortgage caps from the UAE Central Bank.
  2. Funding real estate development in 2013: Funding constraints will apply a natural brake on the pace of new development. Usual real estate financing routes such as off plan sales, IPO/bond issues or bank lending are already challenged. LTV ratio caps might also act as a deterrent as it will limit availability of mortgage finance to end users. In 2013, new development funding is likely to come from overseas cash purchasers and private money from other businesses.
  3. Increased involvement from East Asia and the Global South: Increased real estate investment is expected from China and South Korea due to greater business cooperation with the UAE. Chinese involvement is particularly pronounced in the retail sector and is  likely to continue in 2013 along with possible investments in the hotel and tourism sectors. There is also increasing interest from Sub Saharan Africa, particularly from oil rich countries like Angola and Nigeria.
  4. Increased choice as supply levels remain significant: Buyers and tenants will have a multitude of choices in some sectors in 2013, with significant levels of new supply acting as a constraint on the overall performance of the UAE real estate sector, possibly offsetting the positive impact of improved market sentiment.
  5. Operational and financial management: In 2013, there will be greater awareness of the importance of both the operational and financial aspects of property management. Operational issues are getting increased attention due to various factors like health/safety considerations, demanding occupiers, stringent legislations and adoption of best practices. On the other hand, financial issues are also becoming increasingly important as more focus is given towards greater transparency of operating costs. Best value approaches are likely to be more widely applied, rather than lowest cost options.
  6. Sustainability: With continued progress in 2012, sustainability is expected to move into even greater focus in 2013. With Masdar and Estidama regulations, Abu Dhabi will continue to take the lead.  Most sustainability initiatives in 2013 are likely to be micro and small scale as there is a general reluctance among owners to accept green leases. Evidence from overseas suggests sustainability is unlikely to be fully embraced until either government regulations force change or there is shift in local market perceptions about the financial viability of green buildings.
  7. Government initiatives: The government will remain a major player influencing the UAE real estate market in 2013. Initiatives such as the UAE Central Bank mortgage cap, approval of the Dubai Urban Planning Framework and consolidation of real estate players in Abu Dhabi will better regulate or tighten control on market conditions. While initiatives such as regulation on housing allowances for Abu Dhabi government employees, announcement of major government back projects and AED 330 billion stimulus package in Abu Dhabi will stimulate demand and market performance.

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