UAE property deals to surge

posted on 23/01/2012: 31 views

A higher volume of property transactions are expected in the UAE this year amid increasing investor interest while rents in Dubai's residential market are set to bottom out, Jones Lang LaSalle, or JLL, said on Sunday.

The new growth in transactions will be driven by private investors and high net worth individuals rather than investment institutions, JLL, a leading real estate investment and advisory firm, said in a report it released yesterday.

"We think we will see increased activity in this sector as more confidence returns to the residential sector, perhaps with the UAE continuing to be a beneficiary of the Arab Spring as a relative safe haven, and as more projects get completed and handed over,” said Alan Robertson, chief executive of JLL, Middle East and North Africa.

He said 2011 was a difficult year for real estate investors with most sectors of the market moving in the favour of tenants, with lower prices and rentals. "While these trends appear likely to continue into 2012, the main trend for this year is likely to be an increasing polarisation within each sector of the market. As the performance of the best quality projects will improve, average prices are expected to decline further in 2012 within this increasingly two-tier market.”

The UAE real estate sector will generally see more realism this year. "In 2012, affordability will be to housing what budget hotels will be to the hospitality market. Banks are also expected to continue their more selective approach towards lending criteria,” the report said. JLL predicts a significant shift towards mid-market developments both in the residential sector as well as in the hospitality sector. It also expects banks to become more selective on lending criteria and developers will look to consolidate more projects. JLL forecasts 2012 will see a lot more cancellations as Rera and the Abu Dhabi government looks to reduce future supply.

The advisory firm warned that a military conflict between Iran and Western powers would be detrimental to property prices in the UAE as the country would lose its safe haven status.

A confrontation will affect "confidence in the UAE and the impact on real-estate prices would be certainly negative,” said Fadi Moussalli, regional director for Mena at JLL.

A military conflict may not push prices down by the same amount witnessed in the aftermath of global credit crisis because prices had already been lowered by 60 per cent, said Moussalli.

Robertson said the first noticeable impact of a regional conflict would be a drop in activity levels as people lose confidence. JLL said as the flight to quality continues in 2012, there will be an emphasis on better quality projects across all sectors.

The JLL report said rents would hit bottom in 2012 with lease levels showing signs of an uptick in 2013 despite the estimated 38,000 units due online in Dubai this year.

"Due to the significant development pipeline, rents will continue to experience downward pressure. This will help decrease the rent premium that Abu Dhabi has maintained over Dubai to date,” the report said.

"Lower prices, more choice of higher quality product and its role as a regional safe haven will increase the attractiveness of the UAE market to both occupiers and investors in 2012,” the report said. – Khaleej Times

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