UAE Real Estate Market Trends for 2013



Jones Lang LaSalle (JLL) has just released a new report detailing the top trends for UAE real estate in 2013, which appears to confirm what many investors in the region already believe – that Dubai and Abu Dhabi have already covered some ground on the long road to recovery.

Positive outlook for UAE real estate. Image courtesy of Visit Abu Dhabi va Flickr.com

Positive outlook for UAE real estate. Image courtesy of Visit Abu Dhabi va Flickr.com

Gulf Business reports that the starkest gains have been made in Dubai, where real estate transactions increased by 65% over the last year, says JLL’s Alan Robertson. Much of this success can be put down to Dubai’s strong economic ties with the relatively healthy economies of China in particular, and South Korea, Australia and sub Saharan Africa. This upward trend is expected to continue, and so Dubai’s real estate sector will likely see further growth during the next 12 months, concludes the report.

Things aren’t quite so rosy in Abu Dhabi, with JLL estimating the city to be around 18 to 24 months behind Dubai in terms of recovery. The report says that the situation isn’t expected to improve substantially through 2013, although the city is at least laying the foundations for a full recovery, expected to commence in 2014.

Dubai’s resurgence:

Dubai has witnessed a significant increase in market confidence over the last year, something that JLL puts down to its steady economic growth, rising employment levels and its ‘safe haven’ status. Several major new real estate developments are being planned in the city, and now the government is even taking steps to prevent another ‘bubble’ by instituting mortgage caps on lenders.

Increased foreign investment:

China and South Korea are likely to step up their investments in the region as a result of growing business ties. In particular, Chines investors have been heavily involved with Dubai’s retail sector, and JLL predicts that hotel and tourism could well be next. In addition, JLL points to growing interest among petro-dollar rich oil-producing nations such as Nigeria and Angola.

Growing real estate inventories:

Good news for buyers and tenants, who will have plenty of choice when it comes to buying or renting property in the UAE this year. Several ongoing developments are expected to be completed sometime during 2012, adding further supply to the UAE’s housing inventory. However, JLL warns that there is a risk that this could offset improving market sentiments.

Funding constraints:

One positive factor that will help to limit the pace of development will be the limited availability of funding. Gulf Business notes that bank lending, off plan sales and IPO’s have already been challenged, and says that caps on LTV ratios will act as a further deterrent. However, this lack of domestic financing will be offset by an influx of cash from overseas investors and private funds.

Sustainable building:

Abu Dhabi is likely to take the lead in the development of ‘green’ buildings due to its Masdar and Estidama regulations. However, this will likely remain small-scale as owners worried about financial viability remain reluctant to accept green leases.

Dubai at night

Dubai at night – courtesy Kamel Lebtahi