Real Estate in Dubai on the Rebound in 2017
On Monday, January 9th, Chicago-based global real estate consultancy JLL released the United Arab Emirates real estate market report. This report is cause for celebration for those involved in the Dubai real estate market. It highlight the growth in the region and lays out some strong support for real estate rebound.
“The 2016 Year in Review report said that 31,000 units are scheduled for completion in 2017, with Dubai South gaining prominence, with 550 units slated for completion this year and another 10,000 units in the pipeline.” [source] In 2016, 14,600 residential units entered Dubai’s real estate market, which is the highest figure since 2012. The projected doubling of those numbers in 2017 certainly seems to signify confidence within the marketplace.
According to Mansion Global, the optimism is coming from a couple of factors.
Dubai’s real estate market is expected to benefit from the city’s hosting of the Expo 2020, a world fair with varied themes to showcase achievements of nations. Leading up to the exposition, the United Arab Emirates is expected to invest US$100 million in new constructions across the nation in 2017. That’ll be a 95% increase from last year, noted JLL, citing figures from Middle Eastern business information firm MEED. The majority of the spending, about US$66 million, is concentrated on Dubai projects.
Additionally, both housing supply and demand are signaling a healthier real estate market. A total of 14,600 units entered the market in Dubai during 2016, the highest level since 2012, according to JLL. Home sale prices also saw signs of stabilizing during the last quarter of 2016. Apartment prices declined 1% year-over-year while single-family homes recorded a 2% increase.
Meanwhile, crude oil, the main economic driver for Dubai and the whole UAE, traded higher toward the end of 2016. Oil prices reached US$45 per barrel in December, a sharp rise from the US$30 per barrel oil was selling for in January 2016. Recovering oil prices will improve economic growth and employment, which will in turn boost the real estate sector, JLL said.
Further, Arabian Business quotes JLL MENA’s head of research, Craig Plumb, as saying “the greater diversification of the Dubai economy and the earlier downturn of real estate prices from mid-2014 means the Dubai residential market is now poised closer to its cyclical trough, while prices may fall further in Abu Dhabi.”
Wealth Monitor breaks down the rebound potential outlined in JLL’s ‘2016 Year in Review Report’ into three specific opportunities:
Growth in the UAE’s entertainment and tourism sector
A number of tourist attractions came to completion during 2016 such as the Dubai Parks and Resorts as well as the Dubai Opera, with others under way in Abu Dhabi principally on Yas and Saadiyat Islands which feeds positively into the real estate market. Going forward, we are expecting the completion of Louvre Abu Dhabi, Dubai Safari in 2017 in addition to many more in the pipeline, such as the AED 2.6 billion Six Flags Park which is scheduled for completion in H2 2019, and Sea World on Yas Island by 2022. These should help enhance the UAE’s position as the touristic attraction of choice in the region.
Domestic legislations and reforms
In October 2016, Dubai’s Real Estate Regulatory Authority (RERA) implemented a law whereby all advertisements of property will require a permit. Additionally, in December 2016, the government reinstated the Abu Dhabi 5% rental cap three years after its suspension, and the various new real estate laws which were introduced in 2015.
Opportunities in alternative real estate asset classes
The education sector is leading the way as an increased number of real estate investors, developers and builders seek to diversify their portfolios. The major attraction of this sector to real estate investors and developers are the strength of demand, the attractive financial returns available and the alignment of this sector with government policies to improve educational standards across the region.
All of us at global Real Estate Crowdfunding platform Durise are feeling that a rebound is indeed in the works. What do you think?