UAE Market Report 2016

Having bravely negotiated a rather tough 2016, the real estate sectors of the two main emirates appear well-geared to make positive strides in the New Year. Despite the effects of global events such as Brexit, the US presidential elections and a continued liquidity crunch owing to low oil prices resonating across markets worldwide, the diversity of the UAE economy helped the country sustain these headwinds and players in its various business sectors, including real estate, continued with mega projects.

Projects such as Dubai South, Jumeirah Central and Dubai Creek Harbour showcase the faith developers continue to place in the real estate sector, which in turn inspires confidence in domestic and international investors.

Across 2016, average apartment prices in Dubai were down 11% to AED 2.29 million from the 2015 average of AED 2.57 million, and rents faced a similar downward trend, dropping 6% from the 2015 average. Rents were down 6% on average in Abu Dhabi as well, but unit prices stayed stable overall, coming down by just 1% on average across the year.

Dubai

There remained some pressure on apartment rents in Dubai as new stock was made available in several areas across the emirate. Moreover, an exodus to the suburbs also had an effect on rents in the main parts of the emirate. On average, studio units faced a rental price drop of 8% in 2016, coming down to AED 57,000 from the 2015 average of AED 62,000.

The average price for studios also dropped by 5% to AED 0.77 million, but the average rental yield for unit owners remained attractive at 7.4%. One-bed units faced a similar trend with the average price coming down by 10% and average rent falling 5% to AED 96,000 over the course of 2016. The average yield for 1-bed units in 2016 was 7%.

The average rent for 2-bed units dropped 8% to the AED 145,000 mark, and the average price for 2-bed units was down 11% to AED 2.5 million. Rental yield for the category topped out at 6% in 2016.

On average, 3-bed and 4+ bed units saw rental price drops of 6% and 8% respectively in 2016, landing at the AED 202,000 and 305,000 marks in that order. The average prices for these categories also came down by 11% and 15% over the course of 2016, with respective yields recorded at 5.4% and 3.5%.

Top Apartment Renting Localities – 2016

1. Dubai Marina
2. Jumeirah Lakes Towers (JLT)
3. Bur Dubai
4. Downtown Dubai
5. Dubai Silicon Oasis

Top Apartment Buying Localities – 2016

1. Dubai Marina
2. Downtown Dubai
3. Jumeirah Lakes Towers (JLT)
4. Palm Jumeirah
5. Dubai Sports City

Abu Dhabi

The closing of the year 2016 saw authorities in the emirate reintroducing the 5% rental increase cap for the residential sector, despite rents falling by an average of 6% over the course of the year. The move was aimed at protecting tenants from arbitrary rental hikes by owners that did not align with market norms, a move welcomed far and wide.

In terms of rental prices, Bayut noticed a fall in values across all categories, with studio unit rents dropping the most during 2016, losing 8% of value. The average rent for these units came down to AED 58,000 from the 2015 average of AED 63,000. However, unit owners still earned an average yield of 8% as average unit prices also fell by 1% to AED 0.72 million.

In the 1-bed category, unit prices were down 2% in 2016 on average, while average rents came down by 6% to AED 92,000. The yield for the popular category was recorded at 7.2%.

The rental average for 2-bed units was down 5%, landing at the AED 132,000 mark, with the average price for units remaining at AED 1.86 million in 2016. According to Bayut statistics, the average 2-bed unit returned a rental yield of 7.1%.

Larger units with three bedrooms cost AED 2.71 million on average in the outgoing year, matching the 2015 average for the category, but rents fell by 6% to AED 175,000 on average and the yield topped out at 6.5%.

The largest apartment category, the 4+ bed units, commanded an average rent of AED 240,000, down 7% from the previous year’s average of AED 257,000. The average price was close to the AED 4.65 million mark, while unit owners earned an average rental yield of 5.2% in 2016.

Top Apartment Renting Localities – 2016

1. Al Reem Island
2. Al Raha Beach
3. Khalifa City A
4. Corniche Area
5. Al Muroor

Top Apartment Buying Localities – 2016

1. Al Reem Island
2. Al Raha Beach
3. Al Reef
4. Saadiyat Island
5. Al Ghadeer

OUR TAKE

With prices having levelled out and rents rationalising, the real estate markets in the two main emirates appear closer to maturity than ever, where inflationary and haphazard overnight gains are quickly becoming a thing of the past. The overall UAE market is much more suitable for long-term indulgence, one where attractive rental returns and natural capital value gains keep the stakeholders engaged.

For tenants, there could be no better time to seriously consider becoming a property owner. With reduced rental costs, there is generally more going towards savings now, and affordable prices coupled with the easy payment plans on offer have made the transition from tenancy to ownership much easier.

With a topsy-turvy 2016 in the rear-view mirror, 2017 is likely to be the year when preparations for the Expo 2020 gain full momentum and when the engines of job growth, infrastructure development and economic prosperity are set to rev at full speed.