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| 02 February, 2017

Dubai rentals, property prices likely to recover in H2 2017: Report

Image used for illustrative purpose.

Image used for illustrative purpose.

REUTERS/Jumana El Heloueh

02 February 2017

By Zawya

Rents and property prices in Dubai are expected to recover in the second-half of this year as the residential market in the emirate softened at a slower rate last year, according to a new report released on Thursday.

“We expect the residential property market in Dubai to gradually recover in 2017 with a potential uptick in sale prices and rents from mid-2017 onwards,” real estate consultancy Knight Frank said in its latest report on the real estate market in the United Arab Emirates (UAE).

“Government commitment to spending on infrastructure and facilities, along with the realisation among developers for the need to phase out projects in line with demand, lead us to believe the real estate market in Dubai has become more mature and resilient,” it added.

In January, National Bank of Abu Dhabi (NBAD) said in its yearly investment outlook that the residential real estate market of Dubai and Abu Dhabi may have bottomed out as the rate of decline in property prices stabilised in Dubai while certain mid-market segments recorded a small increase. Read more here

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Knight Frank said the residential market in Dubai continued to soften in 2016, albeit at a slower rate. Sale prices in the mainstream market dropped 5 percent in 2016 versus 7 percent in 2015, whilst prices in the prime residential market declined 4 percent in 2016, versus 5 percent in 2015.

Prices in the residential sector had remained flat on a monthly basis since August 2016, leading it to forecast that the market is “reaching its cyclical trough”.

As Dubai prepares to host the Expo 2020 over the next five years, further government spending is expected to boost the market and thus provide positive sentiment to investors. In addition, international corporates are expected to expand their commercial activity, utilising Dubai as a regional hub, thus prompting demand for office space and more residential properties.

Abu Dhabi set to fall

The real estate consultancy took a more negative approach to the Abu Dhabi market. It expects reinstatement of a 5 percent rental cap is unlikely to impact the market in the UAE capital, given rents are expected to decline further.

Similarly, sale prices are likely to drop amid continued cost cutting and corporate restructuring. Meanwhile, the introduction of a 3 percent housing fee on annual rent is expected to increase cost pressures on households, which would further aggravate demand for property.

While there has been a slowdown in demand on the back of job cuts and corporate restructuring, sale prices remained flat given the limited availability of investment grade quality product. Similarly, rental values remained flat throughout the year following a 1 percent increase in 2015, the report added.

(Writing by Waheed Abbas, editing by Shane McGinley)

© Zawya 2017