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With conditions remaining soft across most sectors of the UAE’s real estate market in 2018, the government launched a number of new initiatives to boost demand.
In the year ahead, market performance will heavily depend on how quickly these investments and regulations have an impact, said JLL, a leading professional services firm that specialises in real estate and investment management.
The general economic environment remained subdued in 2018 with UAE GDP growth at around two per cent, a slight increase from 2017, stated JLL in its 2018 Year in Review report.
The review report provides an overview of the UAE real estate’s market performance across the residential, office, retail and hotel sectors, in light of economic conditions and new government initiatives affecting the market’s future outlook.
In 2019, the country's GDP is expected to grow at a slightly higher rate (three per cent) supported by an expansionary fiscal stance, continued investment ahead of Expo 2020 and higher government spending.
Last year, the UAE government had announced a number of relaxed regulatory controls to further drive economic diversification and stimulate weakened market demand.
The introduction of a new 10-year residency visa and a 5-year retiree visa were launched to encourage investment and retain human capital in the emirates, in turn reversing the current downturn in market conditions, stated the JLL report.
"Overall market sentiment should improve in the long run as the new visa regulations and economic stimuli will provide a boost to the UAE’s real estate market," remarked Craig Plumb, the head of research at JLL Mena.
"However, the benefit of these initiatives is unlikely to have an immediate impact and 2019 is expected to remain a challenging year for most sectors of the real estate industry," he stated.
"The residential and office sectors have the most potential upside from these new initiatives launched to stimulate demand," added Plumb.
In 2018, Dubai witnessed its highest number of residential deliveries in the last five years with a number of major project completions adding 22,000 new units.
There are concerns of supply increasing ahead of demand over the coming years which could continue to place downward pressure on sale and rental prices. However, actual completions are expected to be much lower than the projected deliveries, said the JLL in its report.
In Abu Dhabi, the residential market continued to soften and with additional new supply in the year ahead vacancies are expected to further increase causing further rental decline, it stated.
According to JLL, the office sector was the strongest performer in 2018 owing to minimal new supply entering the market.
Dubai witnessed the lowest new supply in the last five years with only 61,000 sq m of office gross leasable area (GLA) delivered. Future demand is expected to be boosted in both Dubai and Abu Dhabi owing to new relaxed visa regulations and the capital’s new economic stimulus package.
Dubai’s retail sector remains the most challenged because of ongoing increased supply, said the real estate industry specialist.
Retail also faces ongoing competition from e-commerce and although there have been efforts to drive the market with new entertainment concepts, future performance will rely on developers introducing new strategies to increase footfall and spend, it added.
On the hospitality sector, JLL said leading up to Expo 2020, the hotel industry is being driven by short term prospects, but performance remained softened in 2018.
The introduction of short-stay transit visas announced by the UAE government is expected to positively impact the tourism sector overall, it added.-TradeArabia News Service
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