UAE residential realty ranks second for value picks

Houses at Arabian Ranches. The UAE is second in country rankings for residential investment potential, as domImage Credit: Zarina Fernandes/Gulf News Archives

The current weak spell in UAE’s residential property market may be just the ideal moment for investors to come back in. The UAE has been ranked in second spot among global peers as being ripe for investments, according to a new report by the UK-headquartered consultancy Savills. The UAE is just behind the US and ahead of Singapore, the UK and Spain in the rankings.

“We are confident that investors looking for long-term gains will do well as Dubai is a safe and established global business centre in the Middle East, which has broad appeal to a range of buyers from the region and far beyond,” said David Godchaux, CEO of Core, the UAE associate of Savills.

Of the four parameters that Savills bases its rankings on, the UAE does well on three — current population size (inching closer to 10 million) and projected growth, wealth creation (GDP per head) and economic growth.

It was only on the fourth parameter — future supply — that UAE’s position is relatively sanguine from an investor perspective. (Various estimates suggest more than 20,000 new homes are closing on their delivery over the coming months, while CBRE’s latest estimate for the third quarter of 2015 up to the 2018 period puts supply at 62,000 new units.

“The UAE comes second in their country rankings for residential investment potential, as domestic wealth creation and increasing demographic and regional demand continue to grow,” Savills said in its summary.

“The Dubai market has seen this type of more robust demand take the place of more speculative overseas investment in recent years but... is too near the top of the present cycle to top the investability league.”

Over the next five-year term, Savills assigns the UAE with a ‘growth’ status in terms of what is in store for “capital values in second homes and prime markets”.

“The property market has matured a great deal after the government took measures to stamp out short-term speculators,” said Godchaux. “We expect prices in Dubai to rebound in 2016 as the UAE gears up for Expo 2020,”

So, where is an investor who is coming in now likely to see optimum value gains? Savills reckons that the best route for them would be in secondary locations within the city.

“In the more internationally invested markets of Hong Kong, Paris, Dubai, London and Singapore, secondary property looks relatively cheap compared to prime,” the report states. (Savills defines prime markets as where CEOs and senior executives tend to reside, while secondary locations are where other staff tend to call home. Dubai places third after Hong Kong and Paris in the mainstream-to-prime ratio with 7.)

“When a growing population, growing affluence and limited housing or land supply converge, we would anticipate real house price growth,” said Yolande Barnes, director of Savills World Research. “The absence of one or more of these variables can stall a housing market and the absence of two or more can send property values downward.”

Source: Manoj Nair, Associate Editor,


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