Building for the future
Al Ruwad Real Estate’s managing director, Ismail Al Hammadi, discusses the challenges, opportunities and trends prevalent in the GCC’s real estate industry
Al Ruwad Real Estate’s managing director, Ismail Al Hammadi, discusses the challenges, opportunities and trends prevalent in the GCC’s real estate industry
Do you agree that the GCC’s real estate market has bounced back in 2018?
“Driven by Dubai’s connectivity to the global economy, the GCC’s real estate market – and that of the Middle East – has shown great potential this year. The current market situation is not a coincidence, as there are some important factors to be taken into consideration when asking why Dubai has become a major investment attraction.
“Firstly, Dubai has developed world-class infrastructure, with Dubai International Airport handling 88.2 million passengers last year and Al Maktoum International Airport being developed in Dubai South. Secondly, Dubai has developed a business-friendly legal and regulatory environment, and thirdly Dubai is an established event hub. All these have helped to improve investors’ confidence and have given Dubai the status of a free economy where it is safe to pour capital.”
How is investor confidence at the moment?
“As I mentioned, the Dubai real estate market is characterised by optimism and general confidence, and we have numbers to prove that. Dubai Land Department has announced 13,759 transactions in the first three months of 2018, amounting to Dhs58bn. The transactions are expecting to grow in the next quarter and rally towards the end of the year, as analysts predict an upsurge as we enter 2019.
“This is mainly due to the abovementioned infrastructure projects set to be completed before Expo 2020, but also the ever-expanding investor base, which comprises people from 217 nationalities all over the world.”
How important to the industry was the announcement that 10-year visas will be made available, as well as 100 per cent ownership?
“The UAE Cabinet has recently taken a major decision to provide a long-term 10-year residency visa for high-end professionals working in specialised fields such as medicine, engineering, research, science and other technical fields, as well as exceptional students and investors. Moreover, the owners of companies in the UAE will be able to hold 100 per cent ownership, without the requirement of a local sponsor.
“Needless to say, the UAE property market will be the big beneficiary of this new system, attracting foreign investment that could play a bigger role in the local and regional economy. While the UAE is already a magnet for investment, this new rule will boost confidence and help to clear the massive chunk of inventory available on the market, thus making the
market more competitive and squashing any oversupply fears.”
How much has the region’s real estate sector benefitted from governments’ diversification efforts?
“In recent years, Dubai has become a role model for diversification and the city’s 2021 plan to attract over 20 million visitors, the Industrial Strategy 2030 plan and the Expo 2020 are shifting the economy’s focus to tourism and hospitality, trade and real estate, making Dubai a global example of how to overcome any economic challenge.
“According to the latest estimates, GDP growth is expected to rise to 3.7 per cent in 2019 due to diversification, sustainability and infrastructure developments combined with outward strategies to attract foreign investment. The real estate sector is definitely a pillar of Dubai’s economy and the mirror of the city’s ambition to become one of the most unique places in the world, with modern and sophisticated architecture, welcoming millions of people every year for business and leisure alike.”
A number of projects have been announced so far in 2018. How many more big projects can the region sustain?
“Currently multibillion-dollar construction projects are taking shape in Dubai. Apart from the super-tall skyscrapers and new communities, there are other distinctive initiatives like Museum of the Future, Jewel of the Creek, MBR City, Aladdin City, Bluewater Islands or Dubai Creek Harbour that are poised to become iconic landmarks for the future Dubai. The city’s expansion is not being taken lightly by the Dubai government, and usually any such decision comes after 10 to 15 years of feasibility studies and market research on economic development, risks, population growth, and so on.
“While fears of oversupply may be unfounded in terms of residential real estate, the retail market tells a different story. With the completion of many retails projects, such as Nakheel Mall and The Pointe on the Palm Jumeirah, the expansion of Dubai Mall and other retail units coming forward along with Expo 2020, there are concerns of a saturated retail market. Dubai is second to only New York with regard to mall density, despite having a much smaller population.”
Do developers have to think outside of the box to attract investors?
“Most definitely – the world is developing at a fast pace and sometimes we can barely wrap our heads around the new technologies shaping our future. Real estate is no exception. In order to keep up with the latest technological breakthroughs, developers have to be open to experiment and innovate.
“Dubai’s real estate sector has not fallen short in terms of innovation, with the recent digitalisation system, 3D home and office printing and lately the introduction of crowdfunding – a new way of investing where a group of individuals collectively purchase a property and receive a proportional legal share.”
How is the region's affordable segment shaping up? Is this still a big opportunity?
“It is shaping up well and it is going to stay that way. Affordable housing has become a reality in Dubai, as the city’s population will grow by 5 million to 2030 – more than Sydney or Singapore. A big chunk of the Dubai’s population comprises middleincome young professionals and young families, as well as students and young entrepreneurs. Their housing needs have to be met and the market has to find a balance between high-end luxury property and affordable housing. The Dubai Municipality has already taken the necessary steps by offering incentives to developers and nowadays all major developers have expanded their portfolio in the affordable housing segment with more projects in the pipeline.”
Are nationalisation efforts in the workplace impacting the sector?
“I don’t believe that anyone has to suffer from this initiative, which only brings forward more ways in which the local population can take part and contribute to the country’s economy, in order to overcome the structural division in the labour market.
“So far, the UAE has done a wonderful job of bridging any differences that may arise when bringing more than 200 nationalities together in one place. Encouraging the native population to be an active part in the private sector can only serve as a sign of unity, all the while maintaining the local authenticity and cultural identity as the foundation for prosperity.”
Is the new value added tax having an effect on the Saudi and UAE real estate markets? How so?
“The impact of VAT on the residential real estate has been minimal so far, the retail and the hotel sectors, however, have felt some negative effects as landlords had no choice but to pass the VAT cost on to their tenants. But, since it is not always feasible for office and retail rents to rise by 5 per cent, some of the owners have taken the VAT costs upon themselves. Despite this, the overall impact of VAT on the market has not been catastrophic, since we’re only talking about a 5 per cent increase.”
What differences are new technologies making to the industry?
“Dubai real estate will soon undergo a major face-lift with the introduction of a general digital system, The Real Estate Self Transaction (REST) portal, which will allow landlords to sell and manage their properties online, thus reducing the need of service agents and paper documents. Once developed, this smart portal will change the rules of the game, by removing many traditional limitations in the real estate transaction process and allowing people to buy and sell real estate in Dubai from anywhere in the world.
What other changes, trends, opportunities or challenges do you predict for the months ahead?
“With the continuous development of communities like Dubai South, JVC, Dubailand or MBR City, the affordability sector will remain strong, while prices will remain soft. Developers will not take a step back from the affordable market and most probably will come up with smaller units in order to meet demand and keep prices relatively low.
“2018 will also present more opportunities for investors, buyers and tenants as more inventory arrives on the market.”