How will things change for the Dubai property market in 2020? Have we hit the bottom of the property price decline cycle?
The Emirate’s 50-year plan and the Dubai Expo 2020 will now be key indicators for demand-and-supply trends in the market.Zhann Jochinke, chief operating officer of Property Monitor, says there are 50,000 new units from projects already under construction that will hit the market in early 2020, with apartments making up the majority of the upcoming supply.
Jochinke says developers have announced fewer than half the launches this year as of November compared to 2018 and seem to have instead focused on completing existing projects in their pipeline. “Past years indicate a materialisation rate of 40-50 per cent. It is likely that if the market maintains status quo, developers might deliver 60-70 per cent of the expected units during the year or might choose to pace deliveries to match demand at the time.”
With about 25 million visits expected during Expo 2020 Dubai, the wait now begins to see if the short-term Expo visits can turn into long-term residencies, which will give a further boost to the property market. And as we step into the much-awaited Dubai Expo year, here are some realistic predictions from our experts.
1: Expect rents to decline
With the release of more property in 2020, we expect rents to further reduce next year and into 2021. Good news for those who rent.
– Elaine Jones, Executive Chairman, Asteco Property Management
2: A market for Tenants
There is now more choice in the market for tenants in terms of location, quality and value. Landlords need to keep property well-maintained and attractive to tenants. Professional property management and maintenance services will be in demand to ensure highest occupancy.
– Elaine Jones
3: New terms of rent payment
Expect new ways of rent payments such as direct debit monthly payments to become standard in 2020.
– Elaine Jones
4: Review your mortgage commitments
Regrettably for developers and those that have mortgage commitments, the outlook is tough. Capital values are unlikely to reduce any more as the cost of development itself is at the lowest practical level.
– Elaine Jones
5: Favourable cost of property
With the wide range of deferred payment plans being offered in the market, the opportunities to purchase property at favourable cost will appeal to end users who would otherwise be paying rent. According to the Property Monitor Dynamic Price Index, which tracks property price trends across 42 communities in Dubai, properties have become increasingly more affordable for a larger segment of the population.
Investors and owner-occupiers alike are displaying interest in purchasing properties – a factor that helps lift markets from the bottom – with November 2019 marking one of the strongest months in the past decade. A total of 5,025 sales were recorded with off-plan (Oqood) registrations representing 60.8 per cent, notably higher than the year-to-date monthly average of 55.4 per cent. Residents will definitely look at buying a home rather than renting one as prices have become more attractive.
– Zhann Jochinke
6: Good international investor appetite
The ownership structure and the ability to buy income-generating property at a good yield without capital gains tax and property tax represent excellent opportunities for international investors.
– Elaine Jones
7: Healthy balance between demand and supply
Developers will be more pragmatic when it comes to launching new projects and help create a healthy balance between supply and demand. They are likely to focus on creating the right kind of supply that aligns with the future aspirations of the city and its people.
– Amira Sajwani, senior vice-president, operations, Damac Properties
8: Buy off-plan
The trends for off-plan properties with extremely attractive payment terms will continue to attract new buyers.
– Dounia Fadi, CEO, Berkshire Hathaway Home Services Gulf Properties
9: More keys
With less than a year to go until Expo 2020 Dubai, there will be a great influx of tourists, higher number of hotels opening and rooms being occupied. China is becoming one of the biggest markets in terms of demographics operating in Dubai, and the hospitality sector will have to adapt its strategies and offerings to tailor to the needs of that audience.
Tim Cordon, area senior vice-president, Radisson Hotel Group, MEA
10: Support for SMEs and local businesses
Watch out for more diversification in the economy, which will create a robust economic environment. Once local businesses start flourishing it will become the foundation that will make investing in Dubai more fruitful for everyone. 2020 is the perfect platform to kick-start these initiatives.
– Dounia Fadi
The affordable housing segment is experiencing the strongest demand in Dubai as properties priced below Dh1.5 million dominated transactions in the emirate's real estate market during the first nine months of 2019, latest data shows.
Low-cost properties or affordable housing units' sales registered 10.87 per cent year-on-year growth during the January-September period this year as Dubai recorded 18,858 transactions for properties worth up to Dh1.5 million, compared to 17,009 deals in the same period last year, Property Finder Group's report says.
Analysts said sales and leasing demand for affordable units will continue to outweigh larger properties in Dubai due to a growing young population, higher percentage of bachelors and small families, and greater yields offered to investors.
Experts said a correction in prices is steadily making Dubai property more affordable to investors and end-users. Dubai realty has emerged as a mature and affordable market after shedding almost 25 per cent of its value in the past five years, they added.
"Affordable end-user housing demand is still high and is expected to continue to be the case for many years to come," Haider Tuaima, head of real estate research at ValuStrat, told Khaleej Times. "Our research has found that current prices reached previous low levels of 2012, which in turn is prompting many households to consider and/or move to Dubai from the Northern Emirates," he said.
Data Finder's statistics showed that 6,888 transactions were registered in Dubai for properties valued between Dh1.5 million to Dh3 million during the first nine months of 2019, while properties valued between Dh3 million to Dh5 million recorded 2,196 transaction during the period. It further noted that 726 deals for properties valued between Dh5 million to Dh10 million and 520 transactions for properties worth more than Dh10 million.
John Stevens, Managing Director at Asteco Property Management, said properties in Dubai have become more affordable in the global context due to availability of 'unlimited land' for development compared to very saturated and restricted markets of London and Hong Kong, among others.
"Affordability is not only measured in terms of the price, but also in regards to payment terms. Developers have shifted their focus to the price and flexible payment plan due to global/regional headwinds and the general squeeze in purchasing power," he said, adding that this trend is not expected to change in the short- to medium-term period.
Farhad Azizi, CEO of Azizi Developments, said the affordable housing segment is experiencing the strongest demand - significantly more than luxury properties.
"Expo 2020 reinforces demand for affordable units, as it solidifies Dubai's standing as a global hub for business and tourism and sets strong fundamentals for long-term growth across a multitude of industries, including real estate," Azizi told Khaleej Times. "This world-class event, and especially its after-effects, will result in an increased number of visitors, business relationships being formed and infrastructure investments being driven, propelling the vision of Dubai's visionary leadership."
"With the emirate retaining a large number of visitors and jobs being created, the event boosts demand. The affordable segment benefits from this the most, as new residents tend to prefer value-for-money units as their initial homes," he said.
Affordable units supply
Stevens of Asteco said there is enough stock coming to the market, but whether it will meet affordable the housing requirement is a different question.
Referring to the Dubai Statistics Centre's Labour Force Survey in 2014-15, he said approximately two-thirds of people earn less than Dh5,000 per month.
"This means that a large population is not eligible for a mortgage because it requires a Dh15,000 minimum salary. This segment cannot buy off-plan units also as most developers require a minimum income of Dh10,000," he said.
Stevens said that while many residents have been able to upgrade to larger and/or better units due to increased supply and declining rates, a significant number of people still live in shared units as the current 'affordable housing' is inaccessible to them.
"The number of affordable properties is expected to rise amid considering present and future supply that will intensify competition among the developers," Stevens said.
Azizi said there is ample supply in the market and developers are sure to meet investor interest - some better than others.
"Units need to be the right types and sizes, situated in prime locations, have the desired amenities and have the right connectivity and accessibility to major business, leisure and retail hubs. Those whose developments meet these criteria will thrive and see a substantial increase in sales," he said.
Tuaima of ValuStrat said some developers are meeting demand for affordable housing units by building smaller and more practical residential spaces, as well as offering easy payment plans.
"Our research has shown that new-build average prices per square foot are still relatively high when compared to older ready counterparts," he said.
Data Finder's statistics also showed that established communities saw higher demand for ready units, with Business Bay ranking highest at 1,036 sales in the secondary market. Other popular communities were Dubai Marina (942), International City (939), Jumeirah Village Circle (783) and Al Furjan (677).
"There are many units set to be completed which fall within the affordable category, therefore when they become available in the market, we should expect to see sales activity in the secondary market continue to increase over the next year," said Lynnette Abad, Director of data and research at Property Finder.
Ultra-wealthy investors continue to invest in Dubai’s real estate, spending serious sums of money on luxury homes in established communities, a new report said.
According to Property Finder, this year, between January and October, the super-rich snapped up more than 200 apartments and villas worth over 10 million dirhams.
The most sought-after locations include Downtown Dubai, where 34 flats were sold, and Palm Jumeirah, which closed 31 deals. Together, these account for more than half of all luxury home sales during the review period.
In Downtown Dubai, buyers were interested in Emaar's IL Primo project in the Opera District, which accounted for 18 out of the total flats sold in the area. Bigger apartments in the 77-storey tower can fetch prices in excess of 18 million dirhams, according to published ads.
Posh apartments in the Royal Atlantis Resort and Residences in Palm Jumeirah seem to be a clear favourite, accounting for 13 out of the total 31 luxury apartment transactions in the first 10 months of the year. Alef Residences on the man-made island also managed to sell eight of its multi-million-dirham apartments.
Also, this year, a lone penthouse in The One at Palm Jumeirah sold for a staggering 74 million dirhams was the second-highest price ever paid for a property in Dubai in 2019.
Other locations also saw high investor interest: Business Bay, registered five deals above 10 million dirhams. Jumeirah, Jumeirah Beach Residence and Dubai Creek Harbour netted four deals each.
New projects such as Bluewaters Island and Dubai Harbour generated interest as well, but the old favourites, such as Dubai Marina and Al Barari, didn't shine as much, accounting for only a "handful" of the transactions, Property Finder Said.
For luxury villas, residential properties in both established and new communities drew interest, but the highest performer was Dubai Hills Estate, with 47 deals above 10 million dirhams, followed by Palm Jumeirah (43), MBR City (32), Emirates Hills (22) and Jumeirah Golf Estates (13).
“Dubai Hills Estate has fared well across all price points and has been a popular community for both investors and end-users. The amenities, outdoor spaces, new shopping mall and nice mix of office and retail has been very attractive for buyers,” said Lynnette Abad, Director of data and research at Property Finder.
Within Dubai Hills Estate, well-heeled buyers set their sights on Emaar’s villa projects such as Golf Place and Parkway Vistas did particularly well.
Other luxury projects on the Palm that attracted majority of buyer interest were Signature Villas, Jumeirah Zabeel Saray, XXII Carat, Kingdom of Sheba and Emerald Palace Kempinski Hotel.
Other new villa projects that saw luxury house deals were Jumeirah Bay Island, Dubai Waterfront and Akoya by Damac.
Traditional favourites such as Umm Suqeim, Al Barari and Polo Homes in Arabian Ranches also figured prominently in the preferences of luxury house seekers.
Dubai’s real estate market has recently witnessed an uptick in transactions, owing in part to government initiatives that seek to boost investor confidence. However, some analysts claim that the sector will continue to encounter some headwinds due to global factors, including Brexit and the US-China trade conflict.
In September, the Higher Real Estate Planning Committee was unveiled to coincide with efforts to lower the risk of oversupply in the property market, among other objectives.
Subsequently, the Dubai Land Department reported an increase in the volume and value of transactions in recent months.
According to property consultancy firm Asteco in its Q3 2019 report, the increase in transactional activity may be the result of “increased choice, affordability, payment/ finance options” in the market.
However, it is also important to point out that Dubai’s property market is greatly driven by sentiment, Asteco said, adding, “positive/ encouraging government announcements often result in short-term peaks in activity.”
“Despite these efforts, prolonged global economic headwinds, mainly due to US-China trade tensions and uncertainties surrounding Brexit, are likely to continue to weaken employment growth and spending, which will dampen real estate investment,” said Asteco.
Dubai’s beleaguered property market won’t rebound anytime soon, according to a Reuters poll of property market experts, largely due to a chronic oversupply of homes coupled with an economic slowdown in the city-state.
Dubai house prices have slid by at least a quarter since mid-2014, the peak from its recovery from the 2009 debt crisis, and the end of this latest bout of weakness is not yet near.
The Nov. 6-20 Reuters poll of 10 economists and property analysts showed average property prices would decline 10% this year and another 5% next year.
While those forecasts were unchanged from a September poll, the median view for 2021 showed them falling at a slightly slower rate of 2.5% compared with 3.3%.
An oversupply of homes remains a chronic problem in Dubai, according to every respondent who answered an additional question in the poll.
“Oversupply has been a long-standing issue and recent developer activity indicates that this is unlikely to change in the near future,” said Chris Hobden, Head of Strategic Consultancy at Chestertons MENA.
The economy in Dubai, which is part of the United Arab Emirates, is heavily reliant on global trade, which has been under threat from the U.S.-China trade war.
To try to address the property market slump, the government set up a real estate planning commission in September but it is early days for measuring tangible results.
“While the establishment of the Higher Committee for Real Estate Planning suggests an appetite to address the imbalance moving forward, the Committee’s market impact is still unclear,” Hobden said.
All but two respondents to another Reuters poll question said a further slowdown in activity was more likely than a rebound, while they all said a revival was at least a year away.
“While the government has launched a number of initiatives to boost the economy, they will take time to filter through, which means the real estate market will continue on the downward trajectory until they do,” said Jenny Weidling, Manager of Research and Advisory at Asteco.
But recent sales transactions – which have been rising for 10 months – clocked their highest monthly tally since 2008 in October.
Home ownership has become somewhat more affordable after years of falling prices. When asked to describe affordability of the average home on a scale of 1 to 10 – from extremely cheap to extremely expensive – the median response was 5.5, lower than given in September.
Controlling supply, further government stimulus, job creation and visa reforms were listed as potential effective policies for significantly stimulating activity and prices, respondents to another survey question said.
“The combination of these government initiatives … are expected to boost FDI, increase business activity and boost market sentiment and thereby boosting real estate demand”, said Dima Isshak, a Senior Manager at CBREMENAT.
What was the general market movement in Q3?
While on the most part rents were still declining, as they have done for the past couple of years, there were possibly the first signs of recovery in the capital, with some areas recording rises during the period from July to September.
Chestertons reported a 1 per cent average fall quarter-on-quarter for apartments and no change for villas. JLL also found no change to villa rates and a 2 per cent decline for apartments, while Asteco said the changes were "marginal" and noted that areas which experienced significant decreases in previous quarters had no change.
Although there were disparities between the data provided by the brokers, Chestertons said it witnessed an increase in rents in Mohammed bin Zayed City and Al Raha Beach - 4 per cent for a two-bedroom apartment in the latter.
It also reported a 1 per cent rise in villa rents in Khalifa City, while it said Al Raha Gardens' four and five-bedroom villas experienced the biggest declines suggesting "people could be downsizing in this location to save costs".
What else did the property companies have to say?
Despite the slight improvement compared to the previous few quarters, the downward pressure is expected to continue as more supply becomes available.
Most villa developments "maintained healthy occupancy rates", according to JLL, but it said the supply situation means "vacancies are expected to increase further".
The biggest rental movements for apartments were on Saadiyat Island where Chestertons said the cost of a one-bedroom apartment dropped from Dh100,000 in Q2 to Dh90,000 in Q3. The Asteco data showed a 3 per cent average fall for apartments in that area during the third quarter.
How does the supply situation look for the rest of the year?
Like in neighbouring emirate Dubai, there is no shortage at the moment. However, the figures for completed units vary.
JLL said approximately 380 residential units were completed, bringing the total residential stock to 260,000 units. Projects included two buildings in the Shams district on Reem Island, and a tower in Khalidiyah.
An additional 5,400 units are scheduled for delivery by year-end, mainly within Reem Island, Al Raha Beach and Saadiyat Island.
Asteco put the number of completed units at 1,000, of which 900 were apartments and it expects a total of 4,100 to be finished in the fourth quarter.
Will it be a similar case of supply outstripping demand next year? Chestertons doesn't think so.
"There is not a significant amount of new supply expected to be delivered next year which means there could be a better balance between supply and demand which will ultimately lead to a more stable market in the future," it said.
Anything else of note?
The introduction of toll gates in the capital was meant to come into force on October 15.
However, the Department of Transport announced that the tariffs would begin from January 1, 2020, and so any effect on residents' decision on where to live will unlikely be felt until well into next year.
Meanwhile, there have been further plot sales launched, after successful offerings earlier in the year.
Aldar launched Saadiyat Reserve, a 422,370 square metre community featuring 306 serviced villa plots, with planning approval for 4 to 6 bedroom villas. They were available to all nationalities for between Dh1.6 million and Dh2.5m.
Wahat Yas by Wahat Al Zaweya Real Estate Development also launched. This is located between the Al Bahia area and Al Raha Beach, next to the Yas Island water canal. It comprises villa and building land plots (available to UAE nationals only) that start from about Dh1.1m.
Furthermore, Aldar is offering rent-to-own deals for select homes in its West Yas residential community on Yas Island. Tenants pay Dh220,000 a year for five years which is then converted into equity.
Sharjah continues to be the favourite place to live amongst expatriates looking for affordable housing.
And now they have all the more reason to be happier as the rents recorded a further drop of at least three per cent in the third quarter of 2019.
There has been an approximately 11 per cent drop in the third quarter of 2019 compared to the corresponding period in 2018, according to a report by Asteco, a Dubai-based real estate company. The rents in Sharjah dropped by about 32 per cent since the first quarter of 2015 peak time.
“Drop-in rents in Dubai has impacted the rental market in Sharjah as well for the tenants are now negotiating with landlords to reduce their rents or they would vacate the flat,” Karim Aga, a real estate broker in Sharjah told Gulf News.
He said that new tenants are negotiating rents even more while the tenants renewing contracts are also now in a commanding position as they ‘threaten’ landlords to reduce their rents or they would move.
However, Aga noted that more expatriates are moving from Ajman to Sharjah due to dip in rents. “I have noticed that many people who work in Dubai but lived in Ajman are now moving to Sharjah to reduce their travel time to work,” he said.
The affordability in rents is also giving more choices to residents in Sharjah as many of them are upgrading to bigger and luxurious flats in new buildings at better locations and improved facilities.
The decline in rental price has given residents more control and stability in the city.
Preferred areas in Sharjah
Known as family-friendly emirate, Sharjah has a huge selection of properties available for lease. For instance, when it comes to renting apartments, countless options are available to choose from. The most popular version is the 1 BHK flat in Al Majaz, one of the several communities in Sharjah.
Al Nahda is considered one of the most popular areas that are popular for renting apartments. The reason behind its popularity is its location, which is next to Dubai’s border. This area appeals to many residents who commute to Dubai for work as living here tends to cut down their commute time dramatically.
Next on the list is the community of Muwaileh area which is popular for the most affordable rental rates its rental rates. Al Majaz and Al Taawun areas are also popular for upscale housing as they are close to several attractions including beaches, Qanat Al Qasba and the Sharjah Water Front.
According to the latest report, a studio flat in Sharjah now cost from Dh12,000 to Dh23,000 whereas the range for one-bedroom flat is from Dh13,000 to Dh38,000.
It will cost from Dh20,000 to Dh62,000 to rent a two-bedroom flat whereas the rent range for a three-bedroom flat is from Dh30,000 to Dh70,000 depending on the location, amenities and the quality of the buildings. The average rent for 4-bed flats in Sharjah is about Dh80,000 per year.
Has your monthly apartment rate decreased by around 10% or more in the past twelve months? That’s the average rental decrease in the Dubai residential property space during this period.
This permits a Tenant to lease a studio in Business Bay from forty thousand Dirhams and at thirty-five thousand Dirhams and over if the location preference is for Dubai Marina.
According to the latest report from Asteco a single-bedroom unit in the Greens can be purchased for Dh 50,000. Rents are down by eleven to twelve percent at all three locations in the twelve months to end September.
These rentals are based on prevailing and existing trends in these residential clusters. Variations can be expected on these depending on the building, its relative age, amenities, etc. Yet, today, it’s difficult to find any tenant who has not gained from a downward revision of his annual rental outgo. No neighborhood has been immune to the pull.
More handovers are preferred in residential hotspots which should lead to repeated pressure on rental terms decided between Landlords and Tenants. “This trend is likely to intensify owing to the sheer volume of supply expected for handover in short to medium term,” Asteco notes.
For the record, Dubai has seen a thirty-five percent decrease on the residential side since the second quarter of 2014. That was the time when rentals had zoomed to a six-year high after the 2009 downturn.
Dubai's real estate firms are pinning their hopes on lucrative incentives, attractive long-term repayment plans as well as government initiatives to control over-supply to drive home sales.
Property developers in the emirate are left with no option but to offer a series of attractive schemes to win over buyers confronted with a huge supply of an estimated 50,000 units this year. Home prices have plunged anywhere between 25 per cent and 33 per cent in nominal terms since 2014, Standard & Poor's said in a report, citing property consultancy firm Asteco.
Property developers are going the extra mile to lure potential buyers for their newly launched and ongoing projects by extending post-handover payment plans on off-plan properties to ready homes, rent-to-own options and by arranging mortgage finance for initial down payment of the property. Rent-to-own scheme allows the tenants to pay in rent each month, towards a home that they will own at the end of the tenure, making it a much more cost-effective option.
Prominent developers in the UAE, including Emaar Properties, are adopting rent-to-own like schemes to open up their customer base to a new market of potential investors.
Falling Home Price
Developers also hope the low valuations in the aftermath of price corrections in the past couple of years could prop up demand.
"Developers are very aware that they need to be creative with new offerings to attract more foreign direct investment and be competitive with other popular investment markets," Lynnette Abad, director of research and data at Property Finder told local media.'
More than 80 per cent of expatriates in the United Arab Emirates (UAE) still live in rented homes and most of them aspire to own their home and attractive repayment plans will surely help them.
"In fact, all industries depend on financial institutions for growth and momentum. But considering the challenges and barriers that most potential homeowners face from the financial institutions in the region, the rent-to-own plan is imperative for the industry to sustain and support its own growth," Shaher Mousali, chairman of Arthur Mackenzy Properties Group, was quoted as saying by ValuStart, a leading consulting and advisory group.
Mousali said that the rent-to-own scheme, which came to the UAE market some years ago, eliminates the entry barriers that hold back many prospective buyers.
Apart from the rent-to-own scheme, developers are also looking up to the long-term payment plans. "I feel a long-term payment plan up to 15 years or 20 years can lift the market and will inspire existing tenants to become a homeowner in one of the best-developed markets of the world," noted Mousali.
Experts also indicated that a recent move towards a more centralised, well-planned strategic approach of government-based developers to address competition with their private sector counterparts could help mitigate the demand-supply mismatch seen during the last few years.
Sizable Contribution To Gdp
Last year, Dubai's economy grew merely 1.9 per cent, the slowest since the 2009 financial crisis, hit by the downturn in the real estate sector that contributes 13.9 per cent to the gross domestic product (GDP). In fact, as many as 20,978 residential units were completed in the first half of 2019, according to an estimate by Property Finder.
An additional 38,426 residential units in 152 projects are scheduled to be delivered by the end of the year. However, according to media reports, the number of projects on hold has risen to 980, constituting 28 per cent of all those under construction.
Besides, Dubai recorded a 12 per cent growth in real estate transactions at 106 billion dirhams for the first five months of this year, the latest annual report of Dubai Land Department showed.
There are clear signs of growth in demand for homes in the emirate if latest data is any indication. For instance, off-plan sales in the first nine months of this year touched 16,056 units, against 12,979 units for the whole of 2018, according to a Gulf News report, which cited Reidin-GCP data.
However, there was a marginal decline in average price in the third quarter, compared to the previous quarter, according to property website Bayut. And the slide in property prices is likely to continue for the rest of 2019 and is expected to stabilise in 2020 with no meaningful recovery expected until 2021, according to ratings agency Standard & Poor's.
Have you seen your apartment rent go down by 10 per cent or more in the last 12 months? That’s the average rental drop in the Dubai residential property space during this period.
This allows a tenant to lease a studio in Business Bay from Dh40,000, and at Dh35,000 and over if the location preference is for Dubai Marina.
A single-bedroom unit in the Greens could be had for Dh50,000. At all three locations, rents are down 11-12 per cent in the 12 months to end September, according to the latest report from Asteco. Across Dubai, this has been the rental declines based on listings or tenancy contracts. In the third quarter alone, the average dip was 3 per cent.
These rentals are based on prevailing trends in these residential clusters. There could be variations on these based on the building, its relative age, amenities, etc. But these days, it’s rare to find a tenant who has not benefited from a downward revision of his annual rental outgo. No neighbourhood has been immune to the pull.
And more handovers in preferred residential hotspots should lead to renewed pressure on rental terms decided between landlords and tenants. “This trend is likely to solidify due to the sheer volume of supply expected for handover in the short to medium term,” Asteco notes.
For the record, Dubai has seen a 35 per cent dip on the residential side since the second quarter of 2014. That was the time when rentals had zoomed to a six-year high after the 2009 downturn.
At the time, rentals were hugely inflated as Dubai was yet to see the steady completion of new projects. Landlords could demand and get what they wanted.
A better comparison for today’s rental rates should be with early 2017, by which time more the market had seen the last of the super-inflated rental terms. Between 2017 and now, rents would have dropped around 20-22 per cent.
But it need not be a given that tenants can get landlords to meet all their demands on rent cuts. “While the softening market conditions are good news for residents, it is important to note that securing reduced rents requires negotiating skills from the individual tenants … and a willingness to move should the landlord prove unyielding,” the report adds.
“Residents also need to assess the financial benefits of discounts/incentives against the cost/stress of moving. While in many cases the scale tips in favour of the latter, a growing disparity will likely lead to increased tenant relocation in the face of intransigent landlords.”
At the end of the negotiations, what matters is how desperate the landlord is to secure a tenant. Because there’s ample proof that if they do not drop their asking rates, interested tenants can just head to the landlord of their neighbouring property and get a sweet deal.
According to one tenant who recently signed a contract for an upscale villa, much depends on the landlord and his/her estate agent. “My initial experience dealing through an estate agent was dismal — the demand was for Dh180,000 plus. The landlord was an overseas investor and all negotiations had to be done through the agent.
“But just waiting for a month yielded a tenancy for Dh160,000 for another villa in the same cluster. That’s because I could have a direct communication with the landlord.
“In this current market situation, everyone needs to get realistic.”
Flood of new supply
Asteco reckons full-year delivery to total “just over 20,000 apartments and 7,500 villas in 2019. Whilst these figures represent a marked decline on previous projections, it is still a significant volume and a notable increase from 2018, which recorded deliveries of 12,000 apartments and 2,750 villas.”
The report states that handover volumes actually declined in the third quarter — to 4,600 units compared to over 5,000 in both the first and second quarters.
It’s all getting affordable
Head to Jumeirah Village and chances are you can get a brand new — or reasonably new — studio for Dh25,000 plus a year. In International City, the asking rate starts from Dh18,000, while Discovery Gardens and Sports City studios start from Dh24,000, Asteco reports.
Apartment rents in Sharjah and the Northern Emirates recorded average quarterly and annual declines of 3 per cent and 11, respectively. The dip in Sharjah and Ajman was “exacerbated by the increase of supply in those emirates, coupled with the continuous delivery of affordable properties in Dubai.”
Arabtec Holding and Trojan Holding have mandated Swiss bank UBS and Dubai-listed Shuaa Capital as advisers on a potential merger between the two United Arab Emirates construction firms, two sources with knowledge of the matter told Reuters.
Arabtec, which helped build the Louvre Abu Dhabi, said in September the two companies “commenced a review of the possibility of combining their construction businesses.”
The Gulf construction sector has slumped since a collapse in oil prices four years ago forced governments to rein in spending, leading to a debt crunch at some companies that operate across the Middle East.
Switzerland’s UBS are working with Arabtec, while Shuaa is working with Trojan, the sources said.
Arabtec, Trojan and Shuaa was not immediately available for comment, while UBS declined to comment.
Discussions began last week, they added. Should the talks succeed, the companies will start due diligence and a process for a potential merger, said one of the sources.
Trojan Holding, which own a number of construction companies including Trojan General Contracting, has worked on large contracts for developers including Aldar Properties, Emaar Properties, and Nakheel.
Arabtec Holding in November hired New York-based investment bank Moelis & Co (MC.N) to work on a new debt-restructuring plan.
The move came little more than a year after Arabtec raised 1.5 billion dirhams ($408.4 million) in a rights issue to wipe out accumulated losses and separately asked banks to waive terms on its debt.
The UAE, home to the world’s tallest tower, the Burj Khalifa, has faced a sharp real estate slowdown due to oversupply and weaker investment appetite amid lower oil prices.
Dubai’s residential property market was unlikely to see a meaningful recovery in 2021, S&P said in a report in February. Prices have fallen 25 percent to 33 percent in nominal terms since 2014, the report said, citing property consultancy Asteco.
S&P said it expected them to fall another 5-10 percent this year, meaning they would approach the lows reached in 2010, after the financial crisis.