Review and future forecast for UAE Real Estate market in 2020

2 min read

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It has been reported that the residential sales price in Abu Dhabi fell by approximately 7.5% in 2019 and prices in Dubai fell by 6.0% over the same period. In the next three years, it is expected that over 392,000 sq meters of office supply is to be delivered in Abu Dhabi and in Dubai and over the next five years, till about 2025, the retail stocks are expected to increase by 56% to 5.91 million sq meters.

According to experts, while the performance in the UAE real estate sectors had somewhat slowed down on an average, it has again started to see some robust movements in certain market segments. A range of regulations have been introduced in recent times which have increased the ease of doing business and the balance between supply and demand will enhance the fundamentals which underline the Dubai property market, thereby increasing the confidence of home buyers and realtors alike.

Macroeconomic view

The initial estimates from UAE Central Bank will show that the GDP of UAE has increased by 2.3% in 2019, which is an increase from 1.7% growth which had been recorded in 2018. This growth has predominantly been the result of the increase in performance of the hydrocarbon sector which had a growth of 2.8% in 2018 to 4.9% in 2019. The non- oil sector had had a slow growth though, up from 1.3% in 2018 to 1.4% only in 2019. However, with the Expo 2020 looming round the corner, the GDP is expected to increase quickly and a growth rate of 2.2% is estimated.

On the other hand, the residential sale prices in Abu Dhabi saw a decrease of 7.5% in 2019 and in Dubai, prices fell by 6.0%. The latter however, showed early signs of recovery and in 2018, growth was up by almost 26%.

The delivery of upcoming projects in Abu Dhabi and Dubai will spur substantial growth in the sector. Over 8500 units are expected to be delivered in 2020 which is the highest since 2013. Almost 62,500 units will be completed in 2020. This influx will put some pressure on the prices and rents but a number of measures are being put in place to make the market as strong as before.

In the Office space scenario, over the course of 2020, it is estimated that the trend of consolidation and quality improvement would continue and this will be driven by softer market conditions as well as the changes brought in by regulation like 100% foreign ownership law as well as dual licensing. It is expected that the rental rates will decline and the market will be favorable for the renters. The long term commitments from corporate occupiers and the average lease lengths shifting towards the five year mark, will solidify the sector.

What experts predict

It is expected that over the next three years, about 392,000 sq meters will be delivered in Abu Dhabi alone and a 10.6% increase will seen. The majority of the deliveries are however, in non- core locations or are built- to- suit units for owner occupation and it is anticipated that the additional supply will have a material impact on market performance.

The short to medium term outlook for the commercial market in Dubai is still negative however, with the rents expected to go down even further. The office market is going to fragment by area and also within asset grades. In 2019, it was seen that Dubai’s total GLA totaled 10.05 million square meters by 2025 and it is estimated that this will be a total of 11.3 million square meters, which indicates an increase of 12.5%.

In terms of retail, there will be an impact on retailers as there will be greater influence of eCommerce and e-retailers. Physical retail space will however, still attract focused buyers and will see good consumer demand. In Dubai alone, till 2025, it is expected that retail stock will increase to 5.91 million sq meters from 3.46 million sq meters as compared to the fourth quarter of 2019. Over 90% of Dubai’s retail offering is classed as regional or super- regional stock and also 83% of the upcoming stock, in terms of total area will be classed as regional or super regional stock.

It can be said that the Expo 2020 will help bolster the market in this sector and the medium to long term developers are mostly concerned with the microeconomic market, which is slowly becoming competitive all over again.

 

Resident Editor