Ups and downs of UAE property Market in 2015

The united Arab Emirates (UAE) real estate market managed to persevere in the face of global crises that kept plaguing the year 2015. Inflated prices in the previous two years had left the Dubai realty sector in a state of high pressure, fueling rumors that the market had over heated and could crash yet again. Fortunately, such speculations were put to rest after the government intervened in 2013 with fee hikes and mortgage caps to help the sector steer clear of troubled waters. Resultantly, the real estate market of Dubai has kept cooling, significant impacts of which were seen in 2015.

Property prices continued to normalize throughout 2015 and the rental markets in both Dubai and Abu Dhabi performed well over the course of the year.

Among all driving forces that are supporting UAE’s property market, the country’s economic diversity continued to attract a large number of expats, leading to a growth in population and a resultant increase in housing demand.

Dubai

The temporary slowdown in Dubai’s realty market has been mainly influenced by the global recession, oil price crunch and regional security situation. But this in no way indicates that the emirate’s realty sector is weak at the foundations. The demand has certainly been affected by the effect of oil crunch on big-spending Saudi and Russian investors, who have seen revenues suffer.

Even then, the emirate’s market managed to attract investments worth AED 186.34 billion through 33, 907 transactions in the first three quarters of 2015, according to the record of Dubai Land Department (DLD). As for the rental market, average rental yields hovered around the 7% mark.

Cityscape Global, held in September, witnessed the launch of several mega projects that included Jebel Ali Gardens, The Villages, Viridian at The Fields and Skyline Towers, showcasing the strength of Dubai’s real estate sector and the trust it inspires in investors.

In our comparative study of apartment rental values in December 2014 against December 2015, Bayut found the average annual apartment rents in Dubai being AED 137,000 at the end of December 2015, up 2.14% from the average rental value at the end of December 2014.

However, the market for individual bed categories witnessed slight fluctuations. Average annual studio rents in December 2015 were AED 61,000, changing little over the corresponding period last year.

Also, one-bed apartments fetched rents of AED 102,000 in December 2015, registering a 6.6% increase over the corresponding month of 2014. Two and three-bed apartment categories posted 4% and 2% decline in average annual rents at the end of 2015. The four-bed category bore the brunt of real estate slowdown, as average annual rents fell almost 12% in December 2015 compared with December 2014.

Currently, the emirate is looking to implement the idea of developing affordable houses to cater to the needs of a constantly growing population of expat workers. As a first step, affordable living communities like International City, IMPZ, Dubailand, Sports City, JVC and Silicon Oasis are already getting a positive response from realty investors.

Dubai’s realty sector is likely to remain stable in 2016, and with the World Expo 2020 fast approaching, development projects will also gain pace to accommodate millions of international visitors. A growing population will ensure a rising demand for commercial and residential units and an increase in property prices.

Based on the online database of Bayut.com, Dubai’s top localities for renting villas and apartments in 2015 were as follows:

Rank	Apartment Localities	Villa Localities
1.	Dubai Marina	Dubailand
2.	Jumeirah Lakes Towers (JLT)	Mirdif
3.	Bur Dubai	Jumeirah
4.	Downtown Dubai	Al Barsha
5.	Dubai Silicon Oasis	The Springs

Abu Dhabi

The year 2015 brought glad tidings for Abu Dhabi’s real estate sector, especially for rental spaces.

Rental values have increased much in the UAE capital since the removal of rental cap in Q4 2013, with average apartment rents in the emirate rising by 14% at the end of December 2015.

According to Bayut.com’s database, the average rents of studio apartments in Abu Dhabi jumped by 30%, commanding AED 64,000 on average in December 2015 compared to AED 49,000 in December 2014. These numbers point towards a rising demand for economical apartment category and demand for affordable housing in the emirate.

Meanwhile, average rents for one-bed apartments increased from AED 93,000 in December 2014 to AED 101,000 in December 2015. Two- and three-bed apartment categories saw increase in average rental value by 8% and 6%, respectively.

Two-bed apartments registered an increase of 8%, rising from AED 132,000 to AED 142,000, while three-bed apartments increased from AED 177,000 to AED 189,000, posting a 6% hike in value. Rents for four-bed apartments remained stable in 2015.

Per Bayut.com’s database, the following were Abu Dhabi’s top localities for renting apartments and villas in 2015.

Rank	Apartment Localities	Villa Localities
1.	Al Reem Island	Khalifa City A
2.	Al Raha Beach	Al Reef
3.	Khalifa City A	Mohammed Bin Zayed City
4.	Al Khalidiyah	Saadiyat Island
5.	Al Reef	Al Raha Gardens

 

Our verdict

The UAE real estate market clung to its resilient spirit in a difficult business year, as high rental returns on properties in both emirates kept investors interested throughout the year.

Many development projects connected with Expo 2020 are set to launch in 2016 and will animate the real estate market and other businesses to a great extent. Demand for affordable accommodation will continue into 2016 as expat population grows in both Dubai and Abu Dhabi.

Moreover, Dubai government’s decision to continue work on old development projects, worth AED 12 billion, will further reinvigorate the realty sector.

On the other hand, Abu Dhabi seems to be doing well in the property market but it still needs to provide affordable housing options to mid-income groups.

The healthy growth patterns in the emirate’s tourism and hospitality industry are generating interest in the real estate market as well.

Keeping these trends in view, it is highly unlikely that Dubai and Abu Dhabi will give up on their development dreams anytime soon.