UAE’s real estate market remained subdued

Muscat: The overall performance of the UAE’s real estate market remained subdued during first quarter of 2019. With a marked slowdown in 2018, the government has been swift in introducing measures including increased spending, new regulations and revised policies to raise investor sentiment, according to a new report.
"However, with more supply expected to be added throughout 2019 – and we have already seen a substantial number of units handed over in first quarter – we expect prices and rents for residential units to continue to decline amid soft demand,” Manika Dhama, Head of Strategic Consulting and Research at Cavendish Maxwell, said.
Cavendish Maxwell, a leading property consultancy and chartered surveying firm in the Middle East, said in its UAE Market Report for Q1 2019, report.
The report contains key property data and trends for Dubai, Abu Dhabi and the northern emirates. The report is the firm’s first comprehensive quarterly report on the health of the UAE’s property market as a whole, covering the residential, commercial, industrial, hospitality and retail sectors.
The industry report was compiled by the firm's in-house strategic consulting and research team, drawing on proprietary data from its real estate intelligence platform, property monitor, and in collaboration with its extensive client and partner portfolio.
While demand for certain commercial and industrial properties improved marginally in first quarter of 2019, the report highlights that some prospective occupiers were still underserved, with an overall trend of flight-to-quality and more affordable rents.
Commenting on the performance of the industrial and logistics sector, Andrew Love, Partner and Head of Investment and Commercial Agency at Cavendish Maxwell, said: “The market was still challenging in first quarter of 2019, with the gap in the local two-tier segment widening as occupiers continue to seek better value. We have noticed an uptick in demand in free zone areas, especially in Dubai and Abu Dhabi, and some sub-categories have outperformed general market estimates. With landlords offering flexible lease terms and economic incentives, and as strategic areas like Dubai South grow, demand is expected to increase.”
Key insights
In Dubai’s residential sector, the price of villas/townhouses remained relatively stable at an average of AED1.8 million, while apartment prices traded around AED1.2 million on average. In the same period, Abu Dhabi’s major investment zones witnessed an average price drop of 9.6 per cent for apartments and 10 per cent for villas/townhouses. Significant master-plan projects in the northern emirates, including Sharjah Sustainable City and Fujairah Beach Community, will add more freehold investments opportunities in 2019. Additionally, more than 2,000 units are expected to be handed over in Ajman.
Subdued consumer spending, as a result of slower job growth and correction of salaries in first qaurter of 2019, impacted retail and office sectors across the UAE. Vacancy levels in malls rose in some emirates, while new supply is expected to continue to put downward pressure on rents. New office space, particularly in Dubai and Abu Dhabi, once delivered in 2019, will also impact rents. However, demand for Grade A fitted offices continued to be high in first quarter of 2019.
Dubai’s hospitality market benefitted marginally from the Dubai government’s incentives like free limited-stay visas for transit passengers and a value added tax (VAT) refund scheme for tourists. However, hotel occupancy rates declined by 3.1 per cent, according to data from STR Global from February 2018 to February 2019. In the same period, Abu Dhabi City hotels witnessed a 3.8 per cent increase in occupancy. With new resorts, tourism facilities and government-backed initiatives, the northern emirates are also expected to benefit from increasing tourism numbers and occupancy in the coming years.
Industrial areas of Sharjah and Ajman saw increased demand in Grade A warehouse stock, with an upswing in enquiries for modern facilities as occupiers continue to seek better infrastructure. New areas like Khalifa Industrial Zone Abu Dhabi (KIZAD) also saw higher demand, particularly for warehouse space with serviced offices. As the popularity of online shopping and same-day delivery continues, the demand for high-quality storage space is expected to rise in 2019.