The UAE has seen a significant increase in investor interest in its real estate in the last year, returning to its former glory days before the global financial crisis.
As identified in IPIN's Emerging Trends for Global Property Markets 2015 - UAE Focus, published earlier this year, the UAE has shifted its economic reliance to non-oil sectors such as real estate and tourism with significant success.
According to UAE property portal Bayut.com, Q1 saw a slight reversal of roles insofar as Dubai, the former powerhouse of Emirates' real estate remained relatively inactive compared with Abu Dhabi, which continued with its upward trend in rentals during the first quarter of this year.
Dubai Records More Modest Performance in Q1 2015
In Dubai, 2 and 3-bedroom apartments saw moderate increases quarter-on-quarter by 1.11% and 4.02% respectively, with studio apartments increasing in rental value by 3.64% on the back of strong demand.
Bayut.com reports: 'Collectively, apartment prices in Dubai decreased 5.76% on average in this year's first quarter compared with Q1 2014, owing largely to dwindling demand for and decreasing prices of larger (4 and 4+ beds) apartments in the Emirate'.
The portal reports a dramatic decline in transaction volumes, recorded at 37.61% below Q4 2014 based on figures obtained from the Dubai Land Department. This is most likely to be due to the shortage of prime real estate for investors seeking high-end property in Dubai.
Dubai's Rental Market Performance
As rents in Dubai have increased, interest in the Emirate's more affordable property has also risen. Bur Dubai and Jumeirah Lakes Towers became the second most favoured localities for renting after ever-popular Downtown Dubai.
All apartment types saw price increases in the first quarter of this year with the largest rise of 15.29% being recorded for studio apartments. As a more affordable option for many when rentals are rapidly increasing, studio apartments will continue to hold their appeal for margin-conscious property investors throughout this year.
Overall, rentals for apartments increased an average 3.7% during Q1 2014 and further modest growth is expected in 2015. Bayut.com report the most searched locations for renting in Dubai in the first quarter were Dubai Marina, Jumeirah lake Towers, Bur Dubai, Downtown Dubai and Business Bay.
Abu Dhabi Kicks Off 2015 with Strong Growth
Abu Dhabi's property market performed very well during 2014 and continued to strengthen during the first quarter of this year. The luxury property sector saw the most price growth, with four+ bedroom properties increasing by a whopping 19.04% in Q1 2015, according to Bayut.com.
The portal goes on to comment that 'rents of studio apartments in Abu Dhabi saw an average decrease of 11% which is accounted for by the shift of tenants to more spacious options available in the Emirate. One and two-bedroom apartments were particularly favoured among tenants and this increased demand resulted in rental increases of 7% and 9% respectively. The larger residential offerings such as three and four-bedroom apartments registered comparatively marginal rental increases of 3% and 1% respectively'.
Revised Outlook for UAE
Housing supply in the UAE is expected to improve significantly throughout 2015, with 25,000 units scheduled for completion during the year. Bayut.com expect that this to apply some pressure to landlords to offer tenants lucrative incentives like rent-free periods to maintain occupancy in a more competitive rental market.
As Dubai continues its preparations for the 2020 World Expo, investing heavily in its infrastructure, growth patterns in its property market may become less fragmented. However Abu Dhabi is expected to continue strong growth with heightened investor interest as property assets in the Emirate continue to gain popularity.
CEO of Bayut.com, Haider Ali Khan said: “We continue to see strong rental demand in prime areas and there are good bargains available in the market for investing in property. There is a healthy job market which continues to blossom and this bodes well for the real estate market in the years to come”.
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- Wednesday 22 April 2015