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Amidst noticeable growth in realty transactions and number of new investors

UAE property market retains investors’ confidence despite headwinds, holds further prospects for growth

Around AED20 billion is average monthly property transactions in Dubai

Liquidity crunch will continue to be the major concern in the region and rest of the world over the coming period, with most of the economic platforms facing mounting multifaceted pressures that have their own bearing on the level of capital flows available on the markets. Cash levels, according to the current data, are getting more dependent on business and political sentiments prevailing and on the approaches adopted by countries to control or tap cash flows.

In its weekly real estate report, Al Mazaya Holding said that the financial, economic and political pressures faced across the region are not new, but rather go back to many years ago, causing to hurl main economic sectors into a critical state of deceleration and recession, not to mention the growing risks now associated with different types of investments. Specifically, the real estate sector has suffered a lot from the liquidity crunch that has impacted the forces of supply and demand and ultimately affected the overall economic activity.

Most of these pressures, the report said, emanated from uncontrollable economic and financial developments, but reform plans and schemes adopted by countries concerned have contributed to improving economic circumstances and regaining investors’ confidence that helped recover part of the liquidity lost and survive many of the complications and challenges they had faced.

The report mentioned that the UAE real estate sector is resilient and buoyant enough to resist and grapple with the current pressures thanks to the massive investment base it enjoys and the economic incentives and developmental plans launched by the government from time to time, noting that other neighbouring economies are more likely to get affected by the current challenges.

The Dubai real estate market, for example, has posted high levels of liquidity thanks to the billions of dirham generated by the real estate transactions conducted since the beginning of the year, the report said. According to the Dubai Land Department data, property transactions hit a total of AED26.6 billion during January 2017 and AED15 billion in February, rising to AED21.7 billion in March before edging down to AED18 billion in April. The month of May recorded a significant growth of 88 per cent over the corresponding period last year, ratcheting up the value of property transactions to AED20.7 billion, with the first week of June retaining a normal business movement at AED4.1 billion. The report attributed the boom to the positive purchase incentives, including easy-payment plans and competitive rates provided by the UAE-based banks. The report underscored in this regard the importance of continuing efforts to keep the momentum running and maintaining the current high level of cash inflows in order to sidestep any potential pressures and challenges.

The report also attributed the positive mood in the UAE property market to the robust legislative framework laid down by the UAE government. Additionally, the transparency and credibility help developers launch medium and long-term plans and strategies that help the market maintain its competitive edge and retain its favourite status as one of the region’s, and rather the world’s, best real estate investment havens. The report added that the UAE government consistently launches price-correction plans that support the ‘shift from rent to own” among investors who accordingly seek to seize the investment opportunities available and make use of the tremendous advantages provided to real estate developers.

The report stated that the mechanisms of gauging property markets should be based on an overall review and comprehensive benchmarking with other markets, explaining that appraising market performance according to a price retreat trend and accordingly opting for a price correction process is an unreasonable approach. In this regard, the report cited the growing level of investors’ confidence witnessed in the UAE property market since the beginning of the year hitherto and the rapid growth posted in terms of real estate transactions and number of new investors, as indictors that the demand will continue to grow over the coming period to new higher levels. The plans announced by the Emirate of Dubai recently to increase the number of tourists to exceed the 25 million mark in addition to the continued population growth are all factors that are likely to reflect positively on the level of demand.

Increased liquidity levels at the UAE Central Bank and the improvement in deposit levels and financing options noticed since the end of the last year are other signs that the UAE real estate sector is capable of tackling different forms of pressures and challenges.

Concluding, the report said the UAE has a stable and resilient financial system that effectively contributes to the country’s economic diversification programme and restructuring reforms that help safeguard the country against financial and political headwinds. The report, in this regard, pointed to the significant growth recorded in real estate loans during 2016, which reflects improved sentiments among real estate and non-real estate investors. The report added that the UAE market, in addition, is among the best beneficiaries of current geopolitical developments in the region thanks to its strong infrastructure, diversity and growth prospects.