Look who’s on the way back: UAE’s real estate sector. Were there ever any doubts in the presence of COVID-19? Yes, but those are quickly vanishing.
Real estate united
A consortium of premier real estate companies has joined forces to create a new property portal, houza.com, as the market bounces back from a testing six months.
houza is the UAE’s new home for buying, selling, and renting property which has brought together a strong alliance of brokerages to offer all real estate agencies in the UAE more choices when selecting a portal on which to list their properties.
Heading up the operation is none other than Barry Judge, former CEO of Dubizzle and CEO of OLX Group MENA.
The portal boasts support from top consumer-facing agencies in the UAE, such as Allsopp & Allsopp, Better homes, Driven Properties, D&B Properties, and Espace, as well as leading segment-specific agencies, CORE Real Estate and CRC in commercial property, and LuxuryProperty.com in high-end residential units. Recently launched Linda’s Real Estate has also come on board.
Agencies signing up to be part of the houza Network will gain a host of benefits, which will allow smaller or independent brokers access to free Proptech tools and competitive rates for software, that will drive cost and business optimization for everyone.
“As a collective voice, we can negotiate the best rates for partners that they may not usually be able to on a standalone basis,” Judge said.
The consumer will also benefit from a mobile-first, seamless browsing experience, and complete transparency of their data usage, highlights Judge.
Real estate recovery
New industry survey data released by Informa Markets, organizer of Cityscape’s Real Estate Summit, shows 74% of respondents anticipate recovery for the MENA region’s real estate industry within one to two years.
Some 32% expect green shoots of recovery in the next six to 12 months.
Warehousing (60%), data centers (56%), and manufacturing plants (55%) were viewed as key growth areas across MENA, while residential and healthcare real estate were considered to be the fastest recovering sectors.
The importance of Foreign Direct Investment (FDI) was also flagged, with 86% viewing it as the UAE’s primary growth factor.
A challenging year so far
According to property advisory & investment firm, Jones Lang LaSalle, commercial investments worldwide fell nearly 30% to $321 billion in the first 6 months of this year, compared to 2019.
The Middle East and Africa saw activity drop 13%.
In the UAE specifically, and on the residential front, the company says the market could head lower still.
“COVID has definitely delayed hitting the bottom & we still have room for sale prices and rental rates to decline,” Dana Salbak, head of MENA research for JLL told Inspire’s Rebecca McLaughlin-Eastham. “In Dubai, we’re talking about another 10-15% from now until about the next 6-12 months. In Abu Dhabi, a decline is expected, but at a much slower pace. We’re expecting 3-5% over the next 12 months.”
“In Dubai, you’re talking about residential stock of about over 570,000 residential units and that’s both apartments and villas,” she says. “Whereas in Abu Dhabi, you’re talking about 260,000 units. That shows you the quantum and supply of units in each of those cities.”
For those looking to invest in the UAE’s market during this time, JLL says some might be attracted to projects on Abu Dhabi’s Yas Island & Saadiyat Island, not least because of developers offering attractive payment plans.
Abu Dhabi’s leading real estate developer, Aldar, is a case in point. Its financial incentives of late have included post-handover payment plans, the waiver of registration fees & payment options via credit card.
Aldar recently posted a 2% rise in its second-quarter net profit. Year-on-year revenue jumped 21% to more than $544 billion, driven by inventory sales & state projects.
Aldar achieved around $270 billion in off-plan development sales.
As for prices, Farooq Syed, chief executive officer of Springfield Real Estate, sees supply leveling off in a year or two and then prices will start to shift upward.
“In 2020, 40,000 units are going to be handed. But in 2022, 2023 and 2024, we will see a lot of less property coming to the market as compared to 2019-20,” Syed said during a recent webinar.
According to ValuStrat, around 56,916 apartments were handed over in 2019, and the numbers are likely to fall to 34,917 in 2020. But the number will rise again to around 68,128 next year.
Currently, Syed said, the average sale price in Dubai is a little below 1,000 Dirhams ($272) and 900 Dirhams ($245) per sq ft is the average selling price.
“On average, it takes three years to develop a property. If it is costing 750 Dirhams per sqft, the developer needs a 30% return over three years, 10% each year to have a cost of running his business. So we don’t see prices go that much below,” he added.