When is the right time to buy property? In a property market cycle, the “trough stage” is generally the phase that is most conducive for buyers looking for steep discounts. It is the stage characterised by languid investor interest and declining prices — a buyer’s market.
According to research by Asteco, third-quarter rents in some popular locations in Dubai have dipped by double digits year-on-year — 23 per cent for studios in Discovery Gardens and 18 per cent for two-bedroom villas in Arabian Ranches. “There’s no doubt that 2018 has seen the UAE real estate market enter into a mature phase, no longer characterised by the frantic buying and selling that has been its hallmark for many years,” said Elaine Jones, chairman and founder of Asteco.
During the first nine months of the year, the number of investors in Dubai real estate dropped by 30 per cent compared with the same period last year, according to ValuStrat. The value of investments also went down 40 per cent to Dh50 billion. “These statistics seem to suggest that the Dubai residential market is on the cusp of the ‘trough stage’, where buyers could get the upper hand in price negotiation,” said Haider Tuaima, head of real estate research at ValuStrat.
However, despite the signals in the market, many buyers typically wait for prices to further fall, which may not be a sound strategy. “[If they continue to wait it out], it might just be too late,” said Tuaima, explaining how the choicest properties could become quickly unavailable as the market enters the initial stages of recovery. He said homebuyers and investors must be vigilant to pick up signs of the market transitioning into the next phase.
“Our data analysis has shown that the average ticket size for recently sold homes in Dubai is on the rise, suggesting that an increasing number of investors are opting for well-located, high-end property in anticipation for medium-term capital appreciation,” said Tuaima.
Dima Isshak, manager of strategic advisory at CBRE Middle East, also noted a 9 per cent year-on-year increase in secondary market transaction volumes, “suggesting investors perceive real value in the residential market”.
Isshak pointed to Dubailand as the most popular location for future supply, accounting for up to 24 per cent new deliveries in the next couple of years, followed by Dubai Creek Harbour (14 per cent) and Mohammad Bin Rashid City (12 per cent).
While there are currently plenty of buyer-friendly deals, property experts agree that the next 12 months will be a critical phase for the real estate sector — one that they hope will usher in opportunities for both sides of the market.
“Moving into 2019, we anticipate stability in the UAE market and the region generally, which will result in an increase in demand and activity leading up to Expo 2020 Dubai,” said Jones.
Recapping 2018 is not easy as the news cycles were dominated by a slew of positive initiatives and launches by the government geared to boosting market sentiment - while the market itself remained soft. The year began with the introduction of value-added tax (VAT) grabbing maximum attention and we have come to realise the property sector was not too adversely impacted by this. Then, there were announcements of significant positive changes in visa regulations and business ownership rights for expats which when implemented should have a positive effect on the economy.
In the real estate sector, oversupply in the market has led to an average 11 per cent decline in apartment rents between Q3 2017 and Q3 2018. This decline has been felt across the market. Well-maintained and managed properties have been less negatively affected - a positive for tenants as they are able to identify landlords who have reacted to the market and understand that service is important. As the year progresses, there seems to be little change in the statistics. However, the situation may be brighter than the numbers suggest. This lowering of rents has had a very positive impact on tenants and balanced the increase in cost of living.
Since Q4 2017, Dubai has witnessed a drop in rental and sales prices across the city and the downward trend has continued into Q4 2018. The areas with the most pronounced changes include Al Furjan, Arabian Ranches, Jumeirah Park, Jumeirah Village, Discovery Gardens, Business Bay and Jumeirah Beach Residence.
Over the past 9 months, a total of 9,250 apartment units were completed and another 2,650 are expected to be handed over by year-end, while 2,195 villa units were completed from Q1 to Q3 2018 with an additional 1,500 units to be delivered in the last quarter of the year.
With regards to major launches and handovers, various waterfront projects made headlines with the launch of Emaar Beachfront by Emaar Properties, Port de La Mer by Meraas and the handover of Dubai Wharf by Dubai Properties. Additionally, the city saw announcements of project handovers along the corridors of Sheikh Mohammed Bin Zayed Road and Emirates Road, and new communities closer to the Expo 2020 location.
More stable and mature market
The stability and reliability of the market has significantly improved due to higher transparency in the industry, an outcome of more stringent governance by the Real Estate Regulatory Agency and Dubai Land Department (DLD), as well as the full implementation of the escrow system. The softening of prices is a direct consequence of this market maturity, which is now increasingly favouring tenants and buyers.
In a bid to support the transformation of Dubai to a smart city, the Dubai Paperless Strategy was launched by Smart Dubai. Phase one of the initiative is set to be completed by the end of 2018, aiming to eliminate the use of paper transactions. Developers are boasting 3D virtual property tours and blockchain deployment for property contracts, as well as a huge emphasis on seeing a rise in the integration of smart technology in real estate. It is being implemented by developers, property managers and brokers.
A large proportion of the 16,750 units slated for handover by end-2018 is concentrated in the affordable segment, with prices for apartments and villas as low as Dh425 per square foot. Developers are now focusing on building properties for end-users, and are offering attractive incentives as well as competitive rates and payment plans.
Beachfront and community living
Beachfront living appears to be a trend that has caught the public imagination in 2018. More people are also moving to decentralised areas in Dubai, as they offer fully self-contained communities that comprise low-rise buildings, townhouses and villas.
Lease-to-own schemes are now increasingly becoming more popular among developers. They give investors the chance to rent a property for three years and then decide whether they want to buy it by the end of the period.
Outlook for 2019
Dubai's real estate market will continue to mature throughout 2019. It is likely that the current 'buyers market' will persist as investors continue to have a wealth of choice, and as increasing handovers further impact property prices. Another trend that will be more pronounced will be affordability. As the middle-class segment rises, more affordable housing options will enter the market. Finally, the growth in the economy in line with Expo 2020 and Dubai Vision 2021 will set the tone for a positive and upward trend throughout the upcoming year.
Property services company Asteco manages close to 20,000 units in the UAE. Out of which 70% is in the residential sector, a little more than 20% is commercial and 7% to 8% is in the retail.
Asteco engages with several FM suppliers and the firm’s managing director John Stevens says why single service contracts make more sense from their point of view.
“The challenge we face is that we cannot use our influence to buy bulk services. We cannot have a relationship with a single FM company because in most cases a building is tendered individually. We have no full service FM contracts, all of our buildings are individually tendered and we manage each function accordingly — hard and soft services,” Stevens says.
Moreover Stevens isn’t too impressed with FM suppliers billing the ‘one-stop shop’ solution.
He explains: “FM companies are not always offering integrated services — they might be good at doing security and cleaning or MEP but not HVAC. Whereas if we tender individually there is a better possibility of getting the best in each field. And whilst on larger scale developments there is a certain value, I cannot see it being too viable from a landlord’s perspective.”
Millennials, otherwise known as Generation Y or those born between 1981 and 1997, make up 36 per cent of the UAE population and represent the biggest demographic segment worldwide. Developers are now delivering communities that incorporate “live, work and play” elements, designed to appeal to this relatively young population. Affordability, eco-friendliness and a preference towards renting are among the common trends witnessed globally. However, is the millennial buyer’s profile any different in the UAE?
In the current market, millennials tend to be careful with their spending and liabilities. They are also less financially stable than their Generation X predecessors and, therefore, need and want an affordable place to live. When it comes to buying property, they prefer flexible payment options with instalments, and as tenants, they are more inclined to pay their rent in multiple cheques. Unlike their parents, they don’t consider buying a house a top priority — due to their relaxed lifestyle, they are colloquially known as “generation rent”. Research has shown that millennials spend 30-50 per cent of their income on indulgences, such as entertainment, dining out and travel, which leaves little room for saving up for a deposit on a home. Also, with the relatively high cost of property in the UAE, the down payment often proves to be a problem.
An HSBC study revealed that only a quarter of millennials in the UAE own a home. Most expats don’t plan to stay for the long term, and many don’t want to be burdened with the financial commitment of buying a house.
Millennials are tech-savvy researchers and, therefore, a comprehensive digital experience is fundamental to their purchasing journey. According to research by the US-based National Association of Realtors, 99 per cent of millennials look for a home online. Most of them feel that a real estate website that is attractive, easy to navigate and features professional photos is very important when deciding to buy or rent a house.
Location, location, location
Millennials worldwide desire to live close to work, and this is especially true in Dubai. According to a 2017 report by UBS, Dubai placed sixth in the global ranking of cities with the longest working hours — registering a whopping average of 2,323 hours per person per year. Proximity to work allows millennials to commute with ease and save precious time and money on fuel.
In addition, they prefer to live near the Metro and other modes of public transport so that they can eliminate the extra costs of owning a car and don’t have to worry about traffic. This also enables easy access to malls, restaurants and entertainment hotspots around the city.
Design and amenities
Studies by Asteco in the region have shown that millennials prefer to live in newer properties equipped with all the necessary facilities, such as allocated parking, a swimming pool and a gym. Whether buying or renting, they tend to opt for units with an upgraded kitchen and bathroom.
When it comes to layout, millennials tend to favour a large and modern open-plan set-up with a kitchen that opens directly into the living room, as this is optimal for entertaining guests. The presence of a home office is also a plus.
With the UAE population growing each year and more millennials relocating here, developers need to incorporate these elements in their projects if they want to come out on top and keep attracting buyers. It’s likely that key trends such as affordability, convenient location and stylish, modern design will continue to dominate the millennial property market for the foreseeable future.
As Dubai’s property developments mature, the need for quality building management also increases. According to property management firms, it is common for many owners’ associations (OA) to seek advice on best practice and bring more professional expertise on-board.
“There is also a growing emphasis on maintaining investments through planning, implementing sustainable energy savings and ensuring that sufficient reserves are in place for future remedial work and replacements,” says John Stevens, managing director of Asteco.
Craig Ross, partner and head of project and building consultancy at Cavendish Maxwell, concurs that residents now expect more from management firms.
“I have met many owners that feel their voices can go unheard when facing defects in their building,” he remarks.
The firm often conducts technical and condition studies that are mandatory for service charge approval at Dubai’s Real Estate Regulatory Agency (Rera), or to advise on how to correct defects in their buildings. Ross calls for transparency in service fees to ensure owners pay only what they are using and avoid typical disputes over the matter.
“The risk is that this decision is made on a purely cost basis, but as like many things in life the cheapest option is not always best, and quality of management may suffer,” he adds.
Ross lauds Rera for its instrumental role in reforming many making OAs. “Rera is aware that sometimes OA boards will not act in the best way for the longevity of the building if they are unwilling to spend money on critical items, which can have a negative effect on other owners,” he says. “It is for this reason that they are likely to change the OA laws soon, giving both Rera and developers additional powers in management.”
It’s everyone’s responsibility
Keeping a building well maintained was no easy task, especially where due regard for life cycle costing has not been considered in the original build specification, Ross says. “Assets, materials and components that have a long life are generally more expensive, and to save money in construction, developers may use cheaper alternatives to make their product more affordable,” he says, adding that quality developments suffered less, but affordable housing projects tended to have “affordable maintenance” as well.
“We can estimate that for every dirham spent in construction, Dh60-Dh80 can be spent operating a building over its life,” Ross explains, insisting that facilities management (FM) firms should not cut corners to save costs and win bids. “Cutting costs can have disastrous effects on a building and its assets, especially in the ‘back of house’ areas that residents typically don’t see.”
Fires and cladding conundrum
In 2012, 70 per cent of the UAE’s high-rise buildings were estimated to have utilised flammable panelling. However, the use of such materials has dropped significantly since, thanks mainly to the introduction of the UAE Fire and Life Safety code, which includes a significantly enhanced section on façade materials, according to Andy Dean, head of facades in the Middle East at WSP Parsons Brinckerhoff.
“A great deal has changed, and materials going onto new buildings are now fundamentally different as a result,” he adds, remarking there were design challenges. “It isn’t innovation in safety, but in using robust and verified methods of evaluating new and innovative buildings, construction materials and techniques. Crucially, developers have started looking at their existing building stock as well as new design and this is the next important step the entire construction industry must take. UAE high-rise buildings present several unique challenges, including complex evacuation strategies, fire department accessibility, smoke movement and fire control.”
Asteco was awaiting the update of the code when considering restoration plans after a fire broke out at one of the Oceana development’s buildings in 2016. “The updated UAE Fire and Life Safety Code of Practice has pushed the industry to use the highest-grade cladding material, even higher than previously used,” says Stevens. “However, at that time, as an approved and updated panel cladding still had not announced, Asteco decided to replace the cladding with concrete renders.”
Residents of Oceana have been very appreciative of Asteco’s involvement in managing the development, and the aftermath of the fire.
“Thank you for the great remedial works executed on the Adriatic Building as a result of the unfortunate fire. The new building looks extremely good, safe and very professionally executed,” says Suhail Matlub.
According to Ross, the reserve fund typically wouldn’t account for replacing cladding. “If there is insufficient funding in reserve, then the owners would have to contribute through a special levy – they own the building and it’s their decision to replace it or not, or consider fitting some other mitigation measures, for example additional external fire suppression systems, sprinklers or only replacing some of the cladding at interval,” he suggests.
Ross also reckons one may as well make other improvements at the same time, such as retrofitting for sustainability or changing cladding to one that provides better insulation, thus offsetting capital costs in the long run.
“Personally, I think direction and incentives have to come from the local authority, as otherwise not much is likely to happen,” he remarks.
In the case of Oceana, the OA has taken the route of caution and quality over trying to save on the initial outlay, recognising it is saving them money today in insurance, as well as future expenses. Thus it is financing the replacement of cladding on its six other buildings within Oceana.
“Oceana is a premium product on the Palm, and the board decided to make the most practical and sustainable solution. Instead of replacing the panels with more cladding that is up to standard, the cladding will also be replaced with concrete renders, a material that won’t burn,” says Stevens.
Good advice and insurance paramount
Unit owners above all have to understand why they are asked to spend on improvements, making communication a vital component of management, according to Ross. “Unless improvements are mandatory or vital to the overall longevity of the building, then decisions on operational investments are likely to be made on a financial basis,” he says. “However, only considering options in terms of capex can have major implications for operating expenditure of the building further down the road.”
If the individual OA manager is not skilled in this area, a third-party building consultant is vital to avoid exacerbating existing problems, Ross adds.
In the case of Oceana, the OA was able to finance the Dh50-million fire safety improvements on the Adriatic building through the home owners insurance.
“One of Asteco’s roles as professional OA consultant and manager is to ensure they have sufficient funds to continue to function seamlessly. Dh14 million was put away in reserve funds, the money for the project was borrowed from this fund and decreased service charges were required,” says Stevens.
Residents also benefitted from coverage of loss of rent, alternative accommodation, furniture storage and even some service charges.
“An important point to note is that after the fire incident, the insurance premium increased from Dh860,000 to Dh3.67 million. The premium dropped to Dh2,572,500 after the render works proposal, and risk strategy on the remaining six buildings had been presented to the insurance company, and is expected to drop further after the re-cladding work is completed,” Stevens says.
Asteco, the leading property services company in the UAE, has launched a digital payment service that allows its tenants to pay their rent through direct debit. Eliminating the need for post-dated rent cheques, the move is expected to boost efficiencies, enhance ease of doing business and save time and positively impact the real estate market.
Asteco has partnered with National Bank of Fujairah and Direct Debit System FZ LLE, a UAE-based provider of alternative low-cost payment systems, to leverage direct debit as an easy-to-use digital solution for all parties involved in a real estate transaction. As the sponsoring bank, National Bank of Fujairah is facilitating the process and ensuring seamless account reconciliation. Integrated into Asteco’s property management software, the direct debit system is currently operational and has been welcomed by landlords.
As per the system, the tenant signs a Direct Debit Authority (DDA) document with Asteco as a one-time step. Payments are then debited from the tenant’s current or savings account or credit card at the agreed date and frequency, and deposited into the landlord’s account.
Speaking on the initiative, Elaine Jones, Executive Chairman of Asteco, said: “As our world becomes increasingly digital, Asteco is working closely with its partners to embrace innovation and contribute to creating an efficient and secure financial environment in Dubai for long-term residents and newcomers alike.”
She added: “In line with the Smart Dubai 2021 strategy, we aim to become a paperless entity by the end of 2019 and this initiative is the first step in the journey. Through doing so, we believe we will maximise efficiency and seamlessly integrate this service into our operations to create the most enriched business experience possible for our clients, and immediately positively impact the real estate sector in the UAE.”
In the UAE, issuing post-dated cheques for rent is commonplace and, Asteco believes, outdated. Direct debit is the solution to most problems related to rent cheques. Allowing tenants, especially those who are new to the UAE or have an outstanding bank loan, to pay their rent in multiple installments makes the process simple, convenient and safe. Smaller and more frequent rent payments also ease the cash flow for tenants that currently often resort to taking out loans to meet their rent commitments.
Meanwhile, landlords benefit from increased assurance of a regular and stable income. A steady stream of frequent payments assists the landlord or developer in meeting bank repayment schedules. Developers are now commonly offering monthly payment terms or one percent per month buying schemes.
Vince Cook, Chief Executive Officer of National Bank of Fujairah, said: “We are delighted to partner with Asteco and Direct Debit System FZ LLE to create what we believe is a critical milestone in the real estate sector. The move to paperless rental payments benefits all parties involved and helps ease the significant burden of the cheque payment structure. We seek to partner with other industries to develop similar systems in the coming months.”Protected by robust security technology, direct debit is a secure, convenient and fully automated payment method that saves time and money, and is well-established in European countries as well as the US, Brazil and South Africa. The Central Bank of the UAE introduced this alternative payment method in 2013. According to Worldpay, a leading global payment processing company, alternative payments accounted for approximately 59 percent of settlement activity in 2017, up from 43 percent in 2012.
Asteco, the UAE’s largest property services company, has reinforced its commitment to its ‘People First’ initiative with a series of senior management promotions. As part of the drive, the company seeks to recognize the importance of its employees and grow its franchisee network to long-term commercial success.
Building on almost four decades of market-leading experience, Asteco has also strengthened its senior executive team with a string of promotions.
The company has appointed John Allen as Executive Director, James Joughin of the Valuations and Advisory Department and Nick White of the Owners Association Management Services Department as Senior Associate Directors, and Jobby Zacharia as Associate Director of the Valuations and Advisory Department. All new senior directors will have greater autonomy over budgets and act as the spokespersons for their respective departments.
In addition, John Allen has joined Elaine Jones, Executive Chairman and Founder, and John Stevens, Managing Director, on Asteco’s Board of Directors.
Speaking on the new developments, John Stevens said: “Supporting its employees and recognizing their contributions to business growth are integral to Asteco’s DNA as a customer-centric organization. In line with Dubai’s vision of becoming home to a happy, empowered and creative population, we are dedicated to investing in our greatest asset – our people.”
In early 2016, the company launched the Asteco Academy, an internationally recognized and unique real estate training facility, with the aim of developing the growing number of franchisees under the Asteco banner and aligning their deliverables with the company’s business goals. Since then, 150 franchisees received training under the guidance of Andrew Brookes, Learning and Development Manager at the academy.
Stevens added: “Asteco considers its teams and franchisees indispensable to its long-term commercial viability, and aspires to consolidate its position as a preferred employer and partner. With a team of highly skilled and like-minded individuals led by a strategic vision for the future, we seek to reinforce our company’s status as the Middle East’s largest real estate consultancy practice.”
List of few publications of this article
Asteco Property Management today announced that the owners of residential units in the Adriatic building have started moving back following the restoration works that took place on the 15-storey tower after a fire broke out in December 2016. The building remained uninhabitable, as the water used to douse the fire damaged the main electrical system.
The restoration, that commenced in April 2017 after receiving the police and fire investigation reports and confirmation from the insurers, lasted 16 months. During the works, the Oceana Owners Association also took the opportunity to repair damaged building systems including the access control system.
Six units were sold in Adriatic Building during the restoration, and new tenants also expressed interest in leasing apartments in the newly restored tower, located within Oceana Residences, a mixed-use luxury beachfront residential complex consisting of seven buildings comprising 644 units, located at the trunk of Palm Jumeirah.
Asteco Property Management offered advice to the Oceana Owners Association through one of the leading insurance companies, Orient Insurance, part of the Al-Futtaim Group, rated A by S&P Global. The Strata Insurance policy taken out by the association exceeded the minimum requirement stipulated by the local regulators and so the owners could not live in their units or rent them out. However, during the restoration period, they were not financially disadvantaged with the insurance policy paying for loss of rent or alternative accommodation, furniture storage and some service charges, dependent upon the individual situation.
Young Engineering Consultancy Services was awarded the project after the Oceana Owners Association board members completed the tender process. The board members, managers from Asteco Property Management, and the resident Emrill FM team and management were also on site following the fire incident. Asteco Property Management has supervised the entire restoration and handover of the project on site.
During the works, the Oceana Owners Association Board developed a risk strategy to replace the existing cladding on the building’s façade with new Dubai Civil Defense (DCD)-approved grade cladding in a bid to prevent similar accidents from occurring and to ensure the Oceana Residences community conforms to the highest international standards. The proposal was presented to the owners at the annual general meeting in 2017.
The cladding has been replaced with render in some areas of the Adriatic building. Work is shortly set to commence on replacing the cladding on the remaining six buildings – a project that is being funded by the Oceana Owners Association. This will see a substantial drop in the insurance premium, which had increased from AED860,000 to AED3,670,000 after the fire incident. Earlier in 2018, the premium dropped to AED2,572,500 after the render works proposal and the risk strategy had been presented to the insurance company.
Speaking on the restoration project, John Stevens, Managing Director of Asteco, said: “As one of the leading property services companies in the UAE, we take pride in our high level of customer care, always ensuring that the comfort and well-being of our residents comes first. While the incident that took place in December 2016 was very unfortunate, we were able to manage the fire effectively with support from DCD, and from the contractors during the subsequent restoration works. In line with the latest regulations set by Real Estate Regulatory Agency (RERA), the cladding has been replaced with render within some sections of the Adriatic building’s facade, and the Oceana Owners Association is planning to do the same for the other buildings at Oceana Residences.”
In addition to the Adriatic building, Oceana Residences consists of six towers – Pacific, Caribbean and Atlantic on the north side of the trunk of Palm Jumeirah, and Southern, Baltic and Aegean on the east side of the enclave. With superior-quality finishes evident in the detailing of the ceiling, stone flooring and tiling, all bedrooms within the units of the luxury complex offer expansive and breath-taking panoramic views of Dubai Marina or Palm Jumeirah.
Furthermore, the mixed-use development includes DUKES DUBAI hotel that boasts a gigantic pool overlooking the beach and is home to the popular West 14th steakhouse, a New York-style grill and bar with loft-inspired layout and views of the Arabian Gulf from its floor-to-ceiling windows.
Residents of the community also enjoy exclusive access to a gym, children’s play areas, a private beach and an infinity swimming pool. Each building has round-the-clock security services and CCTV monitoring of public areas.
Stevens added: “Asteco Property Management is honored to have collaborated with the Oceana Owners Association Board and the project team to ensure the completion of the works within 16 months.”
List of few publications of this article
Asteco, the UAE’s largest property services company, has released the UAE Real Estate Report Q3 2018 just ahead of Cityscape Global, the premier property exhibition for emerging markets worldwide. The quarterly report highlights key market trends and major project announcements across Dubai, Abu Dhabi, Al Ain and the Northern Emirates, and offers an outlook for the remainder of the year and early 2019.
Dubai Market Outlook
In Dubai, villa and apartment rental rates maintained the downward trajectory observed over the past quarters, decreasing by 3% and 2% since Q2 2018, while the decline of residential sales prices has been more pronounced at 4%. Following a period of relative stability, office rental rates decreased 5% over the last three months as a result of new supply and limited, if not negative, business and employment growth.
Neighborhoods with high handover volumes, both within the city as well as across surrounding developments, recorded the sharpest rental rate downturn and a significant rise in tenant turnover.
John Stevens, Managing Director of Asteco, said: “Rental rates across all asset classes are expected to come under further pressure this year, and this trend is likely to spill over into early 2019.”
Abu Dhabi Market Outlook
In Abu Dhabi, apartment sales prices witnessed a marginal decline of 1% over Q3 2018, mainly due to the limited demand for completed units available within the secondary market, translating into low transactional volumes. However, off-plan and newly completed properties fared better and continued to generate interest.
Apartment rental rates fell by an average of 3% since Q2 2018, with the highest drop reported for mid- and lower-end properties. Villa rental rates followed a similar trend with a quarterly decrease of 1%. The demand for office space remained limited. While the average rental rates softened by 1% over the last three months, some mid- to low-end commercial buildings recorded significant annual declines of up to 10%.
Speaking on the capital’s market outlook, Stevens said: “Residential rents continued to soften over the third quarter due to new supply and reduced levels of demand, largely attributed to a bearish business outlook. These conditions led to an increase in vacancies, particularly in buildings with lower-quality specifications.”
In Al Ain, the overall subdued market activity has resulted in relatively static rental rates in Q3 2018 across most asset classes, with moderate annual drops of 6% for apartments, and 5% for office and retail rents. Meanwhile, villa rental rates recorded a marginal decrease of 2% over the quarter.
Northern Emirates Market Outlook
In the Northern Emirates, apartment rental rates reported an average quarterly decline of 4%, with Ras Al Khaimah and Ajman taking the lead with 6%, followed by Sharjah and Fujairah with 3%, while Umm Al Quwain rates softened marginally by 1%. In Sharjah, office rental rates continued their downward trend with quarterly and annual reductions of 3% and 8% on the back of low demand.
Stevens said: “Developers, particularly in Sharjah, have been sharing statements of ambitious project launches, progress reports and completion updates despite the tepid market outlook. Due to the rise of master-planned communities and large-scale developments, concerns about a possible oversupply scenario in the future are starting to emerge.”
Dubai Market Sentiment
Overall, the market has seen a substantial delay in project handovers, mainly resulting from project delays and overly ambitious handover schedules. Therefore, a sizeable number of units previously forecasted for completion in H2 2018, will only be ready in 2019. Dubai’s new inventory added in Q3 2018 comprises 3,850 apartments and 570 villas and townhouses, bringing the total for the year to date to just over 12,000 residences, with projections for the final quarter in line with these figures.
With a slowdown in new project launches, demand in Q3 2018 focused on completed properties available directly from developers or in the secondary market.
The real estate sector has also welcomed the introduction of new initiatives, such as rent-to-own schemes and crowdfunding. Speaking on the topic, Stevens said: “We believe these developments have the potential to absorb some of the pent-up demand from end users and first-time buyers.”
General Market Sentiment
Summing up the overall outlook for the UAE property landscape, John added: “Real estate professionals and participants have been increasingly vocal in urging the Central Bank of the UAE to lower existing loan-to-value (LTV) ratios to facilitate home ownership for those unable to afford the current mortgage deposit requirements. Although no such changes have been announced at the time of compiling the report, there appears to be a consensus that such a reform would provide a much-needed stimulus to the property market.”
Outlining the trends dominating the rental segment, Stevens said: "We have observed several behavior patterns among residents accross the country, such as downsizing rental units, seeking value-for-money properties and moving into less-established areas. On the other hand, we have also noticed many tenants taking advantage of the sustained rental rate downturn and using this opportunity to upgard to larger units with better-quality specifications, located in popular areas."
List of few publications of this article
Asteco’s ‘UAE Real Estate Report Q2 2018’ has indicated an annual decline in villa and apartment sales and rental rates across the country. The quarterly report also highlighted key market trends, major project announcements and offered an outlook for the remainder of the year across Abu Dhabi, Al Ain, Dubai and the Northern Emirates.
In the Northern Emirates, apartment rental rates continued to soften with an average drop of 2% since Q1 2018 and registered a decrease of 11% over the year. High-end properties in Ajman recorded the highest annual decline of 13%, putting the average rent for a three-bedroom unit between AED40,000 and AED53,000. However, the drop for the same unit type in Ras Al Khaimah was less pronounced at 7%, with rental rates averaging AED95,000 per year.
In Sharjah, rental rates continued their downward trend dropping on average by 2% in the last quarter and 11% annually, with the most prominent drops recorded in Al Butina and Corniche (4%). While Sharjah office rental rates recorded quarterly and annual reductions of 3% and 14% respectively.
John Stevens, Managing Director of Asteco, said: “While the Northern Emirates continue to attract both tourists and expatriates, rental rates are not likely to recover in 2018 due to increasing supply. However, the Northern Emirates will remain popular among residents looking to invest in more affordable accommodation and in holiday destinations.”
A first-of-its-kind mixed-use business centre project in Fujairah spanning an area of more than one million square feet, comprising an office, a hotel and serviced apartments along with a shopping mall and retail center is set for handover by 2020.
Some of the much-anticipated prominent leisure destinations and hospitality projects for residents and tourists include the Fossil Rock Lodge, a luxurious resort in Sharjah that is set for completion in 2018.
On the residential front, several projects were launched this quarter including the Sapphire Beach Residence on Al Marjan Island in Ras Al Khaimah that is anticipated to be ready by 2020. In Sharjah, phase 4 of Nasma Residences and the East Village within Aljada development were launched.
Stevens said: “Ongoing infrastructure works, advancements in the legislative framework and government-backed, large-scale development projects, as well as the launch of exciting hospitality projects are expected to propel investments and tourism growth in the Northern Emirates.”
In Abu Dhabi, the capital of the UAE, apartment sale prices in the secondary market remained relatively stable over the quarter, despite registering an average decline of 8% year-on-year. The Gate area recorded the highest drop of 18% since 2017, followed by Al Bandar with a drop of 14%.
While apartment and villa rental rates witnessed annual declinesof 10% and 9% respectively, showing comparable patterns to the last quarter. Rental declines for studios to three-bedroom apartments ranged from 5% to 18% over the course of the year. The highest drops in the villa rental market since Q2 2017 were seen at Golf Gardens (14%) and Al Raha Gardens (13%).
In Al Ain, villa rental rates fell by an average of 7% since Q1 2018 and 12% annually, with a more pronounced drop recorded for larger four- and five-bedroom units, particularly on properties where rates and incentives were not aligned with the market.
Stevens pointed out: “We are witnessing a shift in rental trends among residents in the Garden City. They now appear to be taking advantage of the decline in prices to move to high-quality, self-sustained communities with supporting facilities. Such communities recorded high occupancy levels, in contrast to stand-alone buildings and villas that reported minimal uptake and high vacancy levels. To attract and retain tenants, landlords continue to offer incentives of up to one month of free rent and flexible payment terms of up to 12 cheques.”
In Dubai, villa and apartment sales prices declined by 4% over the quarter, with an annual drop of 11%. The decline in apartment sales was most prominent in Dubai International Financial Centre (DIFC), Discovery Gardens and Dubai Sports City that registered a 6% decline since Q1 2018. Meanwhile, the highest quarterly drops in villa sales prices were observed in Jumeirah Park (8%), Arabian Ranches (5%) and The Springs (5%).
Despite a lower number of anticipated handovers, a significant volume of new supply was delivered in Dubai in Q2 2018, contributing to an overall quarterly drop in apartment and villa rental rates of 3% and 2%, with annual declines of 12% and 10% respectively.Speaking on the overall outlook for UAE’s real estate landscape, Stevens said: “Proactive government initiatives and ongoing infrastructure development are expected to further boost market sentiment and drive investment in the UAE. The latest positive announcements include the freezing of school fees for the academic year 2018-2019, as well as the introduction of a 10-year residency visa for investors and specialists, and 100% foreign ownership of companies outside free zones. The UAE is continuing to live up to its reputation of being a real estate investment haven, and the new laws will attract an untapped pool of international investors seeking a tolerant country with deep-rooted values to call home.”
List of few publications of this article