Property Weekly: Road to recovery

PWReal estate professionals fromall over the worldwill converge in Dubai next week for the 15th edition of Cityscape Global l Shutterstock

Several big-name developers participating at next week’s Cityscape Global in Dubai expect a new buildup in momentum as the market transitions towards a new growth cycle. Transactions are also expected to spike with the market emerging from the summer lull, but analysts say property buyers would make the best deals if they buy now.

“For local investors or homebuyer this represents some of the most attractive opportunities due to higher yields as well as the opportunity to own a home where you reside,” says Tom Rhodes, Exhibition Director of Cityscape Global. “Internationally, two of our most represented countries are Turkey and the UK, both of which have had recent matters affect their economies.”

In the past 18 months, residential prices have corrected by an average of 15 per cent, but Craig Plumb, Head of Research at JLL Middle East and North Africa, says market players are now more concerned about the timing of the next recovery rather than the extent of further declines. This sentiment, he says, is among the catalysts pushing the market out of the bottom curve.

However, Plumb says some factors will continue to pose challenges. “While oil prices have recovered, they remain below the level required from the government to invest in infrastructure and other projects or to recapitalise developers, without turning to alternative sources of revenue,” says Plumb. “The continued strength of the US dollar, rising global interest rates and uncertainties among European investors following Brexit have not assisted the Dubai market over recent months.

“Despite these concerns, the real estate market is expected to witness a recovery from 2017 on the back of increased spending, stronger sentiment and the global focus on Dubai in the run-up to the World Expo 2020.” The retail and hospitality sectors will also have an impact on the turnaround as the emirate sustains its investments in various retail and tourism projects, although Robert Welanetz, CEO of the Majid Al Futtaim — Properties, does not see a major uplift in retail until next year.

“We expect the soft retail market will continue through the end of the year and will start to rebound in late 2017, driven by continued largescale investments in tourism and retail infrastructure in Dubai, plus increased diversification initiatives from the government,” says Welanetz. “Dubai’s real estate market is characterised by strong fundamentals, making it the most preferred investment destination in the Middle East. The slowdown provides ample opportunities to drive extra value in investments.”

Stakeholders generally agree Dubai has passed the critical phase in the cycle and is on the way to a strong market recovery, although some say oversupply remains a legitimate threat in a market that had been on the brink of overheating.

“This year is helping build up for further stability that we are expecting in 2017 and as we get closer to 2020 the market will improve tremendously,” says Naji Alia, Managing Director of Sparkle Towers — Space Marvelled by Swarovski, a project by Tebyan Real Estate.

“In the medium to long term, the major infrastructure projects, such as the Dubai South and Al Maktoum International Airport, will all continue to create employment opportunities and, therefore, increase the housing demand. The trick is to ensure that we do not have an oversupply, but given the indications, there is little chance of that happening.” 

Many of the new projects by leading developers will be showcased at Cityscape Global. Alia says presenting these projects on a global platform will help further instill confidence in the market. He also advises investors and homebuyers to act fast, with the market offering plenty of lucrative opportunities for long-term investors.

Noorul Asif, Chief Operating Officer of Schon Properties, agrees buyers will get the best deals this year before prices begin to rise next year. “The market rates in real terms are stable. The market sentiment is picking up,” says Asif. “Selling prices in the high-end segment will stabilise, while the mid-market segment will experience an increase in early 2017.”

Broad market
Ziad El Chaar, Managing Director of Damac Properties, says developers now have to cater to more diverse market segments. “With the number of mega projects under way in Dubai, we are witnessing an influx of millennials in a number of industries and these people will need homes to live in and a good portion will want to invest in their own home,” says El Chaar. “Furthermore, with new businesses setting up in the emirate, more office space will be needed. The Dubai Chamber of Commerce and Industry welcomed 8,000 new companies so far this year, expanding its membership base to 193,000, up 4.3 per cent.

At next week’s Cityscape, exhibitors will likely dispense with ostentatious marketing stunts and instead conduct a more product-led showcase. “Buyers have become more discerning and concerned with quality and value for money,” says Plumb. “This has resulted in a shift from flashy giveaways such as cars, jewellery and holidays to the fundamentals of an investment proposition. For those seeking [a home], this means more focus on affordability, quality and community [offerings]. For investors, the ability to rent out the unit and rental yield are the key criteria.

“Payment schedules have become an increasing area of competition among developers, and we would expect to see many developers at the show focusing on making their products more affordable and more financially attractive through creative and extended payment terms.”

Despite market challenges, Rhodes says many developers have kept their focus on the long-term prospects of the property market, which he says is reflected on their attitude towards Cityscape. “The 2015 edition saw a 30 per cent growth in exhibition space in a market experiencing a correction,” he says. “[We have] maintained these levels [this year with] exhibitors set to launch new, exciting projects from across the UAE and globally.”

Foreign exhibitors
Apart from local exhibitors, there are also several foreign establishments exhibiting at Cityscape.

“With over 61 per cent of the UAE’s high-net-worth individuals stating they will be looking to invest by the end of the year, the opportunity for international projects to attract significant investment is clear to see,” says Rhodes.

Source: Hina Navin, Special to Property WeeklyPW


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