UAE PROPERTY MARKET MAY RECOVER IN 2020 OWING TO STATE'S 2019 INITIATIVES

Dubai Frame is one among the several icons of the city.

Government intervention in Dubai and Abu Dhabi’s real estate markets are likely to stimulate the sector in 2020 as opposed to the bumpy ride of 2019, according to a property consulting firm.

While the Dubai government has taken steps to limit the future supply by forming Real Estate Planning Committee, Abu Dhabi opened its real estate doors to foreign investors last April. The state initiatives are likely to have a positive impact on the real estate market in 2020, said Jones Lang LaSalle (JLL) in its report titled “The UAE real estate market: A year in review 2019”.

In Dubai, around 182,000 square meters of office space was delivered throughout 2019, which is the highest level of deliveries since 2015, said JLL, adding: “Although demand for office space remained weak in 2019, several initiatives have been launched by the government to boost demand and increase business activity in Dubai.”

Major initiatives to boost commercial real estate in Dubai include One Free Zone Passport, dual-licensing, full ownership of onshore companies and reduction of market fees imposed on businesses by the Dubai Municipality. “These initiatives are expected to bring in more investments, generate employment, and positively influence office space demand in the medium to long term,” said the property advisory firm.

Average Grade A rents per sqm per annum in the central business district declined 13% to AED1,358 (USD370) in Q4 2019 as against Q4 2018 (AED1,553, USD423). Also, the vacancy rate jumped to 14% in Q4 2019 compared to Q4 2018. JLL said the office market will continue to be under pressure due to subdued market conditions.

In Dubai’s residential market, more than 35,000 units were handed over in 2019, which is the highest ever delivered in a year. While more than 80,000 units are expected to be delivered in 2020, actual completions are likely to be far less.

Residential rents recorded steep declines in Dubai by the end of 2019 compared with a year earlier. Apartment rents and sale prices declining by 8% and 5% respectively. Similarly, villa rents and sale prices declined by around 8% and 10% respectively, said the report.

Dubai’s retail market currently faces the greatest danger of oversupply and therefore more delays in future projects are anticipated. Also, there has been an increase in budget and midscale segment in the hotel industry, where four-star hotels comprise more than 40% of the future supply, it said.

Abu Dhabi's real estate market is suffers from sustainable oversupply

In Abu Dhabi’s office market, vacancy rates continued to increase over the past year to average 28% and are expected to increase further, particularly within Grade B offices as major companies continue to consolidate. Looking ahead, JLL expects rental rates to continue to decline at a gradual pace in the face of a new planned supply.

On the residential front, the apartment sales prices declined 9% year-on-year in 2019 and villas prices went down 2%. The y-o-y rents plunged 6% for apartments and 4% for villas in Abu Dhabi.

Abu Dhabi’s retail market continued on a downward trajectory as average retail rents declined by a range of 10-20% on an annual level, and the vacancy rate reached 25% in Q4 2019 as against 17% in Q4 2018, said JLL.