New Government Initiatives Launched To Stimulate Real Estate Demand
With conditions remaining soft across most sectors of the UAE’s real estate market in 2018, the government launched a number of new initiatives to boost demand. In the year ahead, market performance will heavily depend on how quickly these investments and regulations have an impact, outlines JLL’s 2018 Year in Review report.
The general economic environment remained subdued in 2018 with UAE GDP growth at around 2%, a slight increase from 2017. In 2019 GDP is expected to grow at a slightly higher rate (3%) supported by an expansionary fiscal stance, continued investment ahead of Expo 2020 and higher government spending.
In 2018, the UAE government announced a number of relaxed regulatory controls to further drive economic diversification and stimulate weakened market demand. The introduction of a new 10-year residency visa and a 5-year retiree visa were launched to encourage investment and retain human capital in the Emirates, in turn reversing the current downturn in market conditions.
“Overall market sentiment should improve in the long run as the new visa regulations and economic stimuli will provide a boost to the UAE’s real estate market. However, the benefit of these initiatives is unlikely to have an immediate impact and 2019 is expected to remain a challenging year for most sectors of the real estate industry,” said Craig Plumb, Head of Research at JLL MENA.
“The residential and office sectors have the most potential upside from these new initiatives launched to stimulate demand.” he continued.
In 2018 Dubai witnessed its highest number of residential deliveries in the last five years with a number of major project completions adding 22,000 new units. There are concerns of supply increasing ahead of demand over the coming years which could continue to place downward pressure on sale and rental prices. However, actual completions are expected to be much lower than the projected deliveries.
In Abu Dhabi the residential market continued to soften andwith additional new supply in the year ahead vacancies are expected to further increase causing further rental decline.
The office sector was the strongest performer in 2018 owing to minimal new supply entering the market. Dubai witnessed the lowest new supply in the last five years with only 61,000 sq m of office Gross Leasable Area (GLA) delivered. Future demand is expected to be boosted in both Dubai and Abu Dhabi owing to new relaxed visa regulations and the capital’s new economic stimulus package.
Dubai’s retail sector remains the most challenged because of ongoing increased supply. Retail also faces ongoing competition from e-commerce and although there have been efforts to drive the market with new entertainment concepts, future performance will rely on developers introducing new strategies to increase footfall and spend.
Leading up to EXPO 2020 the hotel sector is being driven by short term prospects, but performance remained softened in 2018. The introduction of short-stay transit visas announced by the UAE Government is expected to positively impact the tourism sector overall.
JLL’s 2018 year in review report provides an overview of the UAE real estate’s market performance across the residential, office, retail and hotel sectors, in light of economic conditions and new government initiatives affecting the market’s future outlook.
