The UAE property market had a lucrative year despite a global slowdown, benefiting from a series of reforms and geopolitical events, including the war in Ukraine, with certain segments set to lead growth rates globally in 2023.
In the third quarter of this year, global commercial real estate returns turned negative for the first time since the start of the Covid-19 pandemic in the second quarter of 2020, according to the American financial company Morgan Stanley Capital International.
While Europe faces its worst performance since the global financial crisis of 2008, the United Arab Emirates broke personal bests.
In November, Dubai real estate surpassed its highest sales transactions since 2011, completing more than 10,000 transactions worth $8.3 billion that month, according to a Dubai-based property group. Property search.
This coincided with a 7.5% increase in contract annual rates year over year.
Prime residential prices in Dubai’The affluent neighborhoods of The Palm Jumeirah, Emirates Hills and Jumeirah Bay Island are set to see the fastest price growth in the world in 2023, according to real estate consultants Knight Frank Middle East.
Growth is also taking place in the area of affordable housing. Developer owned by Abu Dhabi Capital Group Imkan is investing in a $4.03 billion residential project to house approximately 5,000 people made up of both middle income and ultra-rich people.
Investment revenue
The UAE has recently taken deliberate steps to position itself as a safe haven for investment with a variety of confidence-building measures in the form of foreign direct investment (FDI).
The country introduced long-term residence visas, or golden visas, for the first time in 2019, which allow expats to live and work in the United Arab Emirates without the need for a national sponsor, take their retirement and owning 100% of the continent’s businesses.
Abu Dhabi has been ranked the best city in the world in 2021 for its pandemic response and vaccination rollout, according to a London-based advanced analytics firm Deep Knowledge Group.
Dubai hosted the World Expo last year, which saw the number of hotels in the emirate increase from 711 to 759 from January 2021 to 2022, the report reported. Dubai Chamber of Commerce.
A series of new economic reforms are slowing the growth of small businesses and family businesses, including a law last month that aims to turn 200 of these into big companies by 2030, with a market value of more than $40.84 billion and annual revenues of $5 billion.
True (e)state of war
The combined effect of all this increases the attractiveness of the Emirati market for foreign investors who, combined with a neutral position on world politics, welcomes Russian wealth amid Western economic sanctions.
“The war between Ukraine and Russia has been very beneficial for the real estate market here. People have pointed to the UAE as a safe haven, a place where they can be welcomed,” said Izzat Dajani, CEO of IMCapital Partners, a MENA-region investment management and business advisory firm. Dubai-based T, who told Al-Monitor that FDI demographics are changing in the UAE.
“Historically there was a lot of money coming from the Gulf, mostly from Saudi Arabia and Qatar, with some from Jordan, Eastern Europe and Russia,” he said anecdotally, explaining the difficulty of acquiring FDI data for the UAE.
But more recently, he argued that this influx has dissipated.
“I don’t think there was a lot of money coming from Saudi Arabia or Qatar (like before). I think most of the investment actually came from Russia, Ukraine and India , and then you also have some from countries like Azerbaijan and China,” Dajani, who is also a senior expert lawyer at the international law firm LANSKY, GANZGER, GOETH, FRANKL + Partner (LGP), added.
The devaluation of the Euro, Dajani said, has led to lower UAE real estate investments from European countries in comparison and other countries whose currencies face the same problem.
He noted, however, that with the end of the wars, a course of correction in the real estate market and ensuing FDI could take hold.
“One of the best ways to boost FDI is through the privatization of successful state-owned companies,” Dajani said, pointing to recent UAE IPOs raised this year. In 2022, the Emirates witnessed the highest GCC offer $9.7 billion raised through five IPOs.
Economic outlook
The bucket residential property the market softened in 2014 and faced oversupply due to a three-year slump in oil prices, according to Intelligence of Mordor, and even more recently in the wake of the global pandemic. But it is picking up as people increasingly work and learn remotely from home and seek larger spaces.
Global inflation and interest rates have increased, also in the United Arab Emirates, which has a direct impact on property prices, mortgages and FDI, as well as affordability which particularly affects the middle-income renters and buyers. The luxury real estate sector for high net worth individuals and entities remained more resilient.
Property prices in Dubai are expected to rise at a slower pace, according to a September survey by Reuterswho said that for housing in Dubai to be considered affordable, average house prices would have to drop between 5% and 20%, according to Asteco Property Management, Deloitte, Property Monitor, Morgan’s International Realty and ValuStrat.
In the year-to-November 2022, prices in Dubai’s residential market increased by 9.5%, with prices for apartments and villas increasing by 9% and 12.7% respectively, according to Coldwell Banker Richard Ellis (CBRE), a global commercial real estate services group and investment organisation.
“But for the first time, we are entering what we classify as a global downturn rather than a global downturn without a huge amount of inventory,” said Taimur Khan, head of research at CBRE, due to the increase financing costs. and more.
“Over the past two downturns, we (the UAE) have gone there with a large amount of vacancy, a significant amount of inventory coming online and just empty retail and office space. We don’t have that this time,” he told Al-Monitor. “We’re behind the development curve now.”
With demand as high as it is, Khan said increasing the volume of needed development projects is key to the UAE’s remedial strategy and growth.
“There are quite a few developments going on at the high end of the market, or the high end of the market where you see new developments being launched quite regularly. But affordable inventory is very important, the lack of which may pose a challenge to future problems in terms of growth,” he said, welcoming in particular the owners and employees of small and medium-sized businesses who are essential to the economic expansion.
Khan thinks the UAE is aware of this, with easier life projects such as the one in Dubai 20 Minutes Towna transport infrastructure project that aims, by 2040, to enable at least 55% of the population to reach public transport stations within 800 meters of their homes and meet their daily needs.