Market performance exceeds expectations per Q2 2015 nationwide real estate report

UAE, July 07, 2015

The UAE property sector's Q2 2015 performance exceeded expectations, with industry-wide economic diversification seen as the key driver to sustained growth, reveals the latest market intelligence report from TASWEEK Real Estate Development. Moving forward, Abu Dhabi rents are expected to maintain growth, while Dubai is expected to challenge and eventually overcome price fluctuations.

As predicted by TASWEEK's Q1 report, the Abu Dhabi and Dubai markets experienced price corrections specifically for freehold units. Based on the Q2 results, TASWEEK forecasts a moderate 5 to 10 per cent correction in the UAE's residential real estate prices after 18 months of sharp appreciations. Overall, the domestic property market is set to sustain its performance after peaking in 2014, with operating conditions likely to temper performance.

The report adds that economic diversification of real estate, favorable demographics and protective regulatory measures should be able to effectively insulate the local market from any major crisis. Retail and commercial spaces are foreseen to be more resilient than hospitality given the sizable supply of hotel rooms expected in anticipation of Dubai Expo 2020.

Masood Al Awar, CEO, TASWEEK Real Estate Development and Marketing, said: "As we foresaw in the past quarter, the primary markets of Dubai and Abu Dhabi underwent price corrections in Q2 2015 that will most probably result in moderate upward market movements throughout the rest of the year. With global oil prices sharply declining since mid-2014, real estate economic diversification has taken center stage as the driver of growth in the UAE and across the region, which will have a positive spillover effect on the real estate business. Given the recent market shifts, the next half of 2015 will be an important indicator of how our industry will fare in the short to medium term as the UAE gears up for Expo 2020."

Abu Dhabi

TASWEEK's Q2 market research showed that Abu Dhabi's residential market sustained the Q1 trend of landlords protecting rental levels by reducing supply. Demand softened in Q2, though, with the stable prices reflecting no changes over Q1. Overall, rental prices were flat in Abu Dhabi island and in the outlying freehold areas.

Muroor Road offered the best rates for tenants during the surveyed period, with its studio and 1-, 2-, 3- and 4-bedroom apartments available at average annual rates of AED 57,750, AED 68,250, AED 84,000, AED 126,000, and AED 168,000, respectively. The Al Markaziyah residential area also gave good rates of AED 57,750 for studio units and AED 78,750, AED 94,500, AED 136,500 and AED 189,000 for 1-, 2-, 3- and 4-bedroom apartments, respectively. The Khalidiya area also had good prospects for studio (AED 63,000), 1-bedroom (AED 78,750), 2-bedroom (AED 99,750), 3-bedroom (AED 147,000) and 4-bedroom (AED 210,000) apartments.

Hydra Village, Al Reef and Al Raha Gardens, meanwhile, posted the more competitive average villa sale prices. Hydra Village offered 2- and 3-bedroom units for AED 1 million and AED 1.4 million, respectively, while 2-, 3-, 4- and 5-bedroom villas could be bought for AED 1.5 million, AED 2.1 million, AED 2.5 million and AED 3 million, respectively, in Al Reef. Finally, Al Raha Gardens asked AED 2.5 million, AED 3.1 million and AED 4.5 million for 3-, 4- and 5-bedroom villas on average.

As for the office segment, the TASWEEK study indicated a lingering weakness attributed to excess supply and less demand. New business licenses issued in Abu Dhabi in fact decreased by 5 per cent from 1,760 in January and February of 2014 to only 1,700 in 2015 so far. Average rental prices for high-end spaces dropped from AED 2,500 per sqft last year to AED 2,200, while medium-quality offices also went down from AED 1,500 in 2014 to AED 1,300.

Dubai

Residential rates have been falling in Dubai due to weak demand for luxury properties, sliding oil prices and a stronger US dollar, according to the TASWEEK report. On average, sales prices in the emirate decreased by between 5 and 10 per cent compared to 2014. Average rents for studio and one-bedroom units fell 3 per cent, although 2- and 3-bedroom rates rose from 5 to 10 per cent.

The best rental rates were found in International City (studio - AED 42,000; 1-bedroom - AED 58,000; 2-bedroom - AED 78,000; 3-bedroom - AED 100,000); Dubai Silicon Oasis (studio - AED 47,000; 1-bedroom - AED 67,000; 2-bedroom - AED 88,000; 3-bedroom - AED 140,000); and Discovery Gardens (studio - AED 55,000; 1-bedroom - AED 74,000; 2-bedroom - AED 110,000; 3-bedroom - AED 118,000).

The lowest rates for rented villas, on the other hand, could be had at Jumeirah Village (3-bedroom - AED 170,000; 4-bedroom - AED 180,000; 5-bedroom - AED 190,000); Dubai Silicon Oasis (3-bedroom - AED 210,000; 4-bedroom - AED 226,000; 5-bedroom - AED 244,000); and Dubai Land (The Villa) with 3-, 4- and 5-bedroom villas offered at AED 210,000, AED 232,000 and AED 295,000 on  average per year, respectively.

As for residential sales, the competitive purchases were from Jumeirah Village (3-bedroom - AED 2.450 million; 4-bedroom - AED 2.975 million; 5-bedroom - AED 4.4 million); Al Barsha (3-bedroom - AED 2.9 million; 4-bedroom - AED 5.833 million; 5-bedroom - AED 12.3 million); and Dubai Silicon Oasis (3-bedroom - AED 3.775 million; 4-bedroom - AED 4.225 million; 5-bedroom - AED 4.5 million).

Dubai's office business for Q2 2015 saw a 5 per cent increase in prices in line with TASWEEK's projections from its last market research. The number of new commercial licenses issued was at the same level from the previous quarter, thus increasing demand for office space.

The best commercial deals were offered by Dubai Investment Park (Buy per sqft at AED 676, Rent per sqft at AED 65); Dubai Silicon Oasis (Buy per sqft at AED 700, Rent per sqft at AED 52); and Tecom (Buy per sqft at AED 894, Rent per sqft at AED 92).

Conclusion

"TASWEEK strongly stands by its earlier forecast of a robust 2015 UAE property market based on the combined results of our research in the first half. The high level of diversification, population growth, consumer confidence and regulatory support we have been observing over the past months reinforces our belief in sustained local market growth for this year and in the medium term," concluded Al Awar.  

-Ends-

About Tasweek:
Tasweek, a provider of comprehensive real estate development solutions for the UAE and the broader Middle East, leverages over 20 years of extensive experience in valuations, design, and real estate marketing across the UAE, GCC and MENA regions. The private joint stock company draws on its involvement in managing the properties of over 25,000 customers to ensure enhanced client satisfaction in the delivery of a diverse range of services, throughout all stages of the real estate development's lifecycle.

Through its two core competencies of knowledge and networking, Tasweek is highly capable of introducing clients to the right people, creating vital links between industry movers and players, and developing ideas to successfully bring properties to market. For more Tasweek news, please follow us on Twitter at @MasoodAlAwar & @TasweekAE.

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© Press Release 2015