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Villa housing projects considered a key driver of real estate activities and demand indicators for UAE real estate

 

Attractive investment opportunities, high returns and growing demand credited with increased activity

 

In this week’s Al Mazaya Weekly Real Estate Report, the focus of discussion will be on how the housing sector, for villas, currently accounts for the lion’s share of the total real estate activity currently being implemented in GGC markets. The reported acceleration of these developments has, therefore, become of considerable importance in raising the overall pace of real estate activity, in the region.

The development of cultural and investment values carried out by housing (villa) projects has also had a direct role in determining the volume of domestic and foreign investment into the region.  These developments have another role in determining the welfare of the regions’ societies, as the region’s markets have taken a lead in terms of attracting wealthy investors and luxury homebuyers. This is largely credited to these types of development projects being much more rare than in other global markets, at this time.

The evidence referenced above leads Al Mazaya to conclude that the housing (villa) sector is an increasingly important factor for keeping prices of all real estate products firm, while also maintaining the pace of real estate activity, the continuing growth of projects, and the flow of foreign investment, which tends to target luxury real estate products – in spite of the current economic pressures and pricing fluctuations of domestic, regional and global markets.

Al Mazaya Holding’s Weekly Real Estate Report points out that the variety of uses of villas in UAE real estate sector plays an important role in maintaining real estate activity and contributing to increasing rental rises. This is due to the fact that sharing accommodation (and rental costs) within villa units allows the rental demands of landlords to be met, but correspondingly keeps prices too high for individuals to afford the costs associated with renting alone.

Given the distinguished real estate products that the housing sector (for villas) contains, including exceptional sites and unique designs that attract all categories of the target audience, Al Mazaya can confidently say that markets that have a well-developed sector for investment in villas are able to withstand domestic market fluctuations. That is to say, the market can make the most out of exploiting a booming economy and be robust during a recession.

In addition to the above factors, the design flexibility of real estate products, such as villas, plays a considerable role in maintaining the demand indicators in all economic conditions, as the completed villas offer accommodation for both private and commercial investment – with several companies now using ready-made villas as their permanent headquarters.

Al Mazaya’s Weekly Report further suggests that, in the past few years, the UAE market has undergone a state of high demand for real estate products, with villas being the first choice for UAE families, as well as the high-income demographic residing in the country. This has been another factor in sustaining demand for villas – irrespective of the fear that increasing prices are creating a bubble that will eventually burst. Furthermore, the sector’s indicators show a state of high demand for projects currently underway; therefore, the short-term future of maintaining pricing and rental levels in this sector will only be slowed if a shortage in the lands dedicated to villa projects is realised. This has meant that an additional demand for ready-made products available in the market are also being seized due to accelerated competition among investors keen to acquire them for resale, investment or lease. If a scarcity of land for developing such projects is declared then, of course, prices will continue to rise yet further.

It is worth mentioning here that the completion of villa projects is more complicated than their counterpart residential towers projects. In addition to the advanced infrastructure and vast areas of land befitting the nature of these projects, land acquisition, allocation and time is needed to develop them. This means demand can be managed via delays – whether they are market-driven or staggered for release, by the developer.

Al Mazaya’s report also points out that the unique concepts adopted for the development of real estate in the UAE have given the sector further attractiveness and strength over regional competitors. For example, the recently announced floating villas concept – on “The World” artificial island grouping – just off the Dubai coast, constitute a form of development that challenges other developers to keep innovating and maintain a high level of concept creativity.

In Abu Dhabi, the Masdar City project offers a new concept of eco-villas – meeting the growing demand for sustainable housing units, as well as the pressing need for adopting highly innovative and quality designs that use fewer natural resources, as compared to traditional designs. Masdar City symbolises an advanced model for the development of environmentally friendly, waste-free cities, with zero CO2 emissions – around the world. In this context, Saadiyat Beach villas are a shelter for those looking for the dream home, as this project is classified under one of the sustainable urban development projects adopted by the Emirate of Abu Dhabi. Saadiyat Beach villas will also enjoy innovative designs and be available in varying sizes, meeting the needs of homeowners seeking luxurious, contemporary lifestyles.

Al Mazaya’s report states that it is a natural outcome of supply and demand factors that various real estate products will be affected by market conditions. This includes the villa sector where prices are adversely influenced during a recession, low demand and low liquidity.

That said, trends in the UAE market have proven to be otherwise in recent times; therefore, rents remain flexible and adjustable to market forces while sale prices remain above expectations because the demand for villas is high. It has, however, been noted that freehold zones will be more vulnerable to rent fluctuations versus other property developments across the country, given that the decline comes as a result of a state of slowing activity, at the beginning of 2016. In addition to these factors, the cutbacks in villa rents has not exceeded two per cent since the beginning of the current calendar year, while the supply of new modern villa complexes may further pressurize prevailing prices, if demand indicators remain stable.

In conclusion, Al Mazaya’s report asserts that the villa sector has capitalised on the rise of market activity in real estate products, with commercial and tourist efforts in the region’s countries making significant contributions. These developments have created an investment space for real estate developers to expand their investment activities in developing villa projects, with UAE nationals preferring villa projects that fulfill luxury requirements, spaces, gardens, parking lots and guarantee privacy. At this level of demand, real estate developers are increasing the share of villas being developed, whether at the level of freehold projects or other projects dedicated to UAE nationals.

Al Mazaya suggests that the demand for villas in Abu Dhabi is undergoing a continued increase at both external and internal levels, given the advantages provided by villas over apartments. This comes amidst the availability of funding channels at high ratios: a matter that gives the sector further attractiveness, demand, and solidity of villa prices. As a consequence, their investment attractiveness is improving in terms of sales and leasing, whenever prices increase and demand is high.

Al Mazaya’s report further emphasises the importance of diversifying real estate projects in order to minimise severity rates brought on by financial and economic developments in the region’s real estate market. A potential crisis can be identified and brought on by trends that focus on a particular product – if the self-interest of investors and developers is left unguided.

It is worth mentioning that each investment option has its own features and characteristics that distinguish it from others. In a boom economy, economic growth, stability, growing demand, high returns and asset values factors are among the most important criteria on which project preferences are made. Such circumstances place villa projects in the lead as one of the most important options in the real estate investment criteria for quality, ROI and long-term stability of an investment’s asset value.