Property sale and rental activity across Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah and Fujairah was minimal in the fourth quarter of 2011 as problems with electricity and water supply and sewage continued to slow the pace of supply, according to a recent report by Asteco.
The residential and commercial market was stagnant for the second half of 2011 and is expected to remain unchanged due a lack of new supply.
"Transaction activity has been limited throughout the year for both the office and residential market as completed buildings stood empty due to a lack of utility connections and inadequate sewage in Sharjah, Ajman, RAK and Fujairah," says the report.
Several buildings in RAK and Fujairah are expected to get electricity connections this year, resulting in an increase in the number of available units and a subsequent drop in rental rates.
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However, connectivity problems throughout the market will be resolved at a slow pace due to the high number of buildings marked for completion and handover.
"In recent years power shortages have become increasingly problematic, as an expanding population has seemingly outgrown the capabilities of the existing infrastructure," stated CBRE in a recent report.
"As more residential units enter the market, the importance of providing adequate facilities and amenities has become increasingly clear, and a major consideration in judging the overall appeal of real estate offerings for both end-users and investors," it added.
In March last year, the federal government allocated Dh5.7 billion to build additional infrastructure focused on increasing production capacity of electricity and water facilities in the five emirates over the next five years. This included the construction of a 100km main water pipeline from Kalba, at the southern end of the UAE's East Coast, to Dibba, in the north, passing through the cities of Fujairah and Khor Fakkan. It is expected to supply 23 million imperial gallons per day (Migd) to Fujairah, 5 million each to Khor Fakkan, Dibba and Kalba and 3 million to Dhadnah.
According to Craig Plumb, head of research at Jones Lang Lasalle, another reason for the delay of completing new supply is the low demand.
"One reason for the delays has been due to infrastructure issues such as power and roads and the other reason is more market related. People do not want to flood the market because the prices are down," said Plumb.
In the first half of 2011, Asteco reported a continuing shift of residents from these emirates to Dubai, as tenants looked to upgrade and take advantage of falling rent prices in Dubai.
"There is going to be limited demand for residential in the northern emirates as the residents shift to Dubai or Abu Dhabi," said Plumb.