Comeback year for Dubai’s maturing property sector
Bcre — building, construction and real estate — has been core to Dubai’s astonishing success rise over the past 20 years. The real estate sector has consistently been the second largest contributor to the Dubai’s gross domestic product (GDP); being a key driver of foreign and national investment, job creation, economic growth and competitiveness. Now as Dubai and the UAE begin to move even further towards diversification, the sector’s role is becoming even more critical to the country’s ambitious growth plans through 2030.
While 2016 was a challenging year for both the economy and the sector with GDP declining to 2.3 per cent and growth remaining flat at around 1.5 per cent, 2017 showed positive growth indicators. Through the global downturn and now during the economic upturn, Dubai’s real estate sector has stood its ground and has become even stronger.
2017 has been a year of transformation for the sector, with total real estate transactions exceeding Dh285 billion ($77.6 billion) through 69,000 real estate transactions according to the Dubai Land Department. This translates to an increase of 6 per cent in transaction value and 14 per cent in transaction volume over 2016. Last year also indicated new trends in the market such as the revival of offplan buying, and more value-conscious property options to suit buyers from all walks of life.
The off-plan market really took off in 2017, accounting for more than 65 per cent of all sales for the year, a 56 per cent rise from the year before, according to recent data from global real estate consultancy firm CBRE and Khaleej Times newspaper. While 39 per cent of units sold comprised of one-bedroom apartments, studios were the second highest segment and accounted for 36 per cent of all offplan sales.
2017 also saw a rise in the number of end-users purchasing property, marking an important turnaround for the market where both investors and end-users are coming back in greater numbers. As enduser demand rises, the choice of developer becomes crucial and investing in a strong developer with a proven track record of deliveries translates to consumer confidence. Large developers who have delivered 20,000 or more units provide a level of comfort to end-users and are less susceptible to changing market forces. As the property market continues to consolidate and with last price correction in second half of 2017, more buyers are coming into the market and this trend should continue through 2018. Even though asking prices continued to ease last year, prices in established communities held strong with little or no declines, thanks to the popularity and facilities in the more established residential areas. Last year, the secondary market accounted for 32 per cent of all sales transactions. Dubai’s economic diversification efforts lead to an increase in new jobs creation, which led to an increase in population size. This has also been a contributing factor to the sector’s growth last year.
As the property sector continues to evolve and grow, developers are expanding their offerings and creating competitive payment plans that make it easy for first and second home buyers to invest without the need for a second loan or mortgage before handover. Smaller deposits and flexible installment plans have made it easier than ever to purchase a property in Dubai.
The outlook for 2018 remains positive, with continued demand expected to drive further growth in the sector and leading up to Expo 2020 Dubai, where global attention will turn to Dubai and the country prepares to welcome 20 million visitors.
With Dubai’s own growth ambitions, and as international investors look to alternative investments abroad, Dubai and the UAE continue to be a hotspot for property hunters looking for safe investment opportunities with high yields and returns.
2018 may very well be the comeback year for the sector. The writer is senior vice-president at Damac Properties. Views expressed are his own and do not reflect the newspaper’s policy.