The year 2014 has been a great one for Dubai's real estate market for a number of reasons. The property sector sustained steady growth throughout the year and the same trend is expected to continue in 2015, top industry specialists told Khaleej Times.
The market is one of the most regulated in the world following the implementation of new rules. The Dubai realty showed clear signs of maturity amid growth and decline in certain areas during 2014.
The year started with booming market both in rental and freehold sales following the historic win of the World Expo 2020 bid that created a strong investor sentiment.
Dubai-based top developers announced mega projects during the year and received very good responses for key developments. Emaar launched several high-profile projects in 2014, all of which gained strong investor response, including from international investors. Among the key launches of Emaar in 2014 include Boulevard Crescent, Boulevard Point, Vida Downtown, Opera Grand, Boulevard Heights among others.
Damac Properties also witnessed positive sales in its two master developments, Akoya by Damac and Akoya Oxygen, as regional and international investors recognise the intrinsic and visionary fundamentals on which Dubai is built.
"2014 has been a pivotal year for the real estate market in Dubai. We may well look back on the past 12 months and see this as when a paradigm shift occurred — moving from speculation to much more serious medium- to long-term investors looking to be part of the Dubai growth story,” said Niall McLoughlin, senior vice-president, Damac Properties.
Mahendra Pratap Singh, managing director, SPF Realty, said the year 2014 will remain significant in the UAE's history for a number of reasons, as far as the real estate sector is concerned.
"First of all, the market showed clear signs of maturity amid growth and decline in certain areas. However, these fluctuations were within manageable limits — and the market behaviour was in line with that of a matured market,” he said.
An Emaar spokesperson said: "The robust growth of Dubai and the UAE contributed to the positive growth of the property sector this year…..”
The years started with a clear sign of boom — both in rental and freehold sales — carrying on from the UAE's historic win of the World Expo 2020 bid for Dubai, creating a strong investor sentiment.
"We have witnessed the sudden flurry of activities in the freehold sales market at the beginning of the year. We have seen a number of developers, who were absent during the crisis period, coming back in to the market.” Pratap Singh said.
It was just around that time that the Dubai Land Department had also stepped up vigilance on trying to curb speculation — to protect the sector from the emergence of ‘cowboys'. The DLD then doubled the registration fees to curb speculative buying. This had a very intended effect, nearly eliminating the re-emergence of the fly-by-night operators.
At the latter part, most major developers have continued to release new inventories to expand the market and investor base — which worked really well. Property buyers, who have seen the market evolve over a decade, have also become more educated, matured and responsible. They now buy properties from the established developers and those who have a reputation in the market.
Now, a developer cannot sell "artist's impressions” — unless he's paid fully for the land acquisition, received all necessary building permits, opened an escrow account, among other formalities. The Real Estate Regulatory Agency (Rera) is very strict on all these issues and violators are being fined.
"This year, we have witnessed a clear choice made by the property buyers, who investing in properties from developers they trust. The time-tested people who have cruised through the recession have been clear favourites. If this trend continues, this will support good players with solid track record of delivery and eliminate irresponsible developers and strengthen the market, Singh said.
The residential real estate market will continue to grow in Dubai while commercial freehold property might remain under pressure due to access inventory. However, developers who are focusing on delivery and quality products, will be clear winners.
Going forward, as the market matures further — developers who could offer better financial options and strike good mortgage deals with banks for their projects, will dominate the market — as most families with household incomes in excess of Dh25,000 to Dh30,000 could move into their freehold homes — by putting their rents into mortgage payment.
Prices and rents that were raised between the third quarter of 2013 and the second quarter of 2014 beyond a reasonable limit due to the Expo 2020 frenzy to the extent that the market fundamentals could not support them — had to come down to the levels that the market fundamentals could support them.
Last year, most landlords hiked rents — not only in Dubai but also in Sharjah and the Northern Emirates — significantly. In some cases, the jump was as high as 50 per cent, which the market could not sustain.
"If the economy grows at five per cent, rents and property prices should grow in accordance to that, not a 50 per cent jump. So, the correction had to happen. That's what has happened in the second half of the year, and that's good for the consumers, buyers and the market, he said.
Property Developer Nakheel has announced to award contracts worth Dh7 billion in 2015 compared to Dh5.3 billion in 2014. A majority of contracts will be awarded in the first quarter of 2015 starting from Dh1.7 billion contract for Deira Islands Mall in January.
Nakheel chairman Ali Rashid Lootah said that retail expansion will continue to be a focus for Nakheel in 2015 and beyond.
"We are targeting 10 million square feet of leasable space through a diverse range of new projects — from large-scale malls and souk-style complexes that will attract residents and tourists from far and wide, to local centres that serve the immediate needs of people living in our communities,” Lootah added.
Sharjah opens market
It a major development, Sharjah opened its property market in 2014 for non-Arab residents in UAE by launching a Dh2 billion Tilal City. The mixed-use community development with an area of 25 million square feet was launched by Tilal Properties.
The Sharjah Executive Council issued Resolution No. 26 of 2014, which, for the first time, allows foreign investors the right to own properties in Sharjah for up to 100 years. This resolution is expected to stimulate investment in the emirate.
For Sharjah's real estate sector, the new project, located on Emirates Road, close to Al Dhaid interchange, and 10 kilometres from Sharjah International Airport, marks a new milestone as until now, only UAE and GCC nationals were allowed to acquire plots and properties in the emirate.
The average plot size is around 7,500 square feet, but it is possible to purchase multiple plots or even entire zone. Plot prices range from Dh110 per square foot to Dh303 per square foot depending on plot size, position and usage. The project is expected to be completed in 2017.
Emaar's operations in 2014 were defined by strategic partnerships in line with the vision of the Dubai government to create ‘cities of the future' that also support the ongoing preparations for the World Expo 2020.
"With Dubai's economy gaining traction led by the preparations for the World Expo and the leadership's focus on further strengthening the city's world-class infrastructure, 2015 promises to be a rewarding year for the property sector,” Emaar Properties spokesperson said.
"The Dubai government has taken concerted measures to manage unhealthy speculation, which has brought greater stability to the market. Alongside, the strong performance of Dubai's traditional growth sectors including retail, tourism, hospitality, aviation and trade, will drive the positive outlook for the property sector.
"We will continue to develop premium real estate assets in Dubai to meet the demand for world-class property and add value to our stakeholders.”
In the first nine months of the year Emaar has handed over more than 830 residential units including 529 villas and 301 apartments, taking its total delivery to date at over 38,000.
Damac Properties' McLoughlin said that following the tough years in 2008 and 2009, the Dubai Government, supported by leading developers and the banks, has ensured that the market is one of the most regulated in the world — certainly the most regulated in the region – and prices have therefore settled down.
The implementation of new rules has certainly played its part in helping Dubai back to the top, but other factors, including the infrastructure developments, safe-haven status and liquidity returning to global markets have been big factors also.
The maturity of the market is now shining through and Dubai has again been named as a top global city for property investment heading into 2015, he said, adding that the Cushman & Wakefield report showing investments were up more than 2,000 per cent in the year to June 2014, and that $3.68 billion had been invested over the period.
The steady growth of the real estate market in Dubai reflects the growth of the city and helps to support all of the other elements which drive Dubai from trade and business, to travel and tourism.
"Major master developments are now back on the agenda and construction is moving at an impressive pace. Liquidity has returned and investors are in the market for the long-term,” he added.
There remains a huge desire for quality and luxury — a home away from home, with easy access to the city, while providing a retreat from the everyday hustle and bustle of metropolitan life.
"Dubai clearly has numerous challenges ahead, as is the case with any fast-growing, global destination. …while 50,000 new homes are scheduled to come online in the next five years, they will quickly be soaked up by the new residents arriving in Dubai — around 100,000 people each year,” he said.
Deyaar Development also launched billions of dirhams projects during 2014. The developer's Dh500 million Montrose project comprises of three towers — a hotel apartment and two residential towers. Deyaar also launched twin-tower The Atria project in Business Bay worth Dh900 million. Another project is Dh3.5 billion ‘Midtown' project that will include 27 buildings. The 5.5 million square feet master plan comprises of two hotels.
In 2014 Deyaar implemented the strategy of diversifying its capabilities in the real estate sector. "To achieve this priority, we expanded our development portfolio beyond commercial and residential properties, through marking a foray into hospitality projects. In line with the new direction, we have allocated up to one million square feet for upcoming hotel and serviced apartment projects in prime locations in the city,” Saeed Al Qatami, CEO Deyaar Developments, told this scribe.
"We have always aimed at achieving the right mix, and Deyaar's latest developments reflect the market's increasing demand for upscale residential and well-appointed serviced apartments in Dubai. The company's strategy to venture into this sector is particularly relevant given Dubai's projection of attracting more than 20 million visitors during Expo 2020,” Al Qatami said.
He said that the rise of Dubai's fast-growing real estate market has created a need for units in different market segments, and Deyaar seeks to fulfill this need with its diversified portfolio.
Increasing economic activity and continued growth in the UAE have boosted investor appetite and confidence in the real estate sector, he said, adding: "Today we have a unique situation with different market segments competing for the same investments. Given the scenario, the market growth needs to be regulated by policies that enable long-term, sustained development in the real estate and property sector.”
Talking about the challenges to the industry, he said: "One of the challenges the real estate sector is facing at the moment is that soft and hard costs of construction have increased as an obvious fallout of the high inflation rates. Despite this, the market continues to witness increasing demand for real estate units across different segments.”
Dubai will continue to develop realty solutions to cater to the increasing number of tourists visiting the emirate throughout 2015. The emirate's aim of attracting 20 million visitors per year has opened up unlimited opportunities for investment in the hospitality sector.
Among other developers, Danube Properties, newly launched property arm of Danube Group, launched two projects in 2014. Its first project ‘Dreamz by Danube', worth Dh500 million, saw an instant sell-out on public launch day. Second project ‘Glitz by Danube' worth Dh300 million is an affordably luxury project, according to the company. Both the projects were launched by the group's brand ambassador and legendary Indian cricketer Sunil Gavaskar.
Indian superstar Shah Rukh Khan also launched Dh2.4 billion Royal Estates by SRK project in 2014. It's a joint venture involving a 2.3 million-square-foot gated community in Dubai Investments Park.
Source: Khaleej Times