With residential sale prices falling at a slower rate than rents, the UAE’s property market is likely to see an increasing number of end users buy properties rather than rent them, according to real estate consultancy JLL.
According to a Q2 report from JLL on the UAE’s property market, rent prices for apartments fell by approximately 11 percent, while sales prices fell by about 9 percent compared to the same time period last year.
A similar downward trend was observed in villas, with rent prices falling by 5 percent and sales prices falling by 9 percent compared to Q2 2018. With limited demand and ample supply available, the residential market is expected to continue to face downward pressure over the next 12 months.
“With sales prices dropping at a slower rate, we’re more likely to see the market shift to a buyer’s market as opposed to a renter’s market, especially for the end users – the people who live here – and not just investors,” JLL Mena research associate Dana Salbak told Arabian Business in an interview. “We’re going to see people buy and own properties, rather than just rent them.”
Salbak added that the trend is “complemented by different payment plans and schemes that developers are launching to attract demand.”
The Expo factor
Additionally, Salbak added that there is unlikely to see any significant uptick in the market related to the upcoming Expo 2020 Dubai.
“There’s this huge hype about Expo and the impact of Expo, and I think that’s already been taken into account in the market. The impact has already been absorbed,” she said. “I don’t think we’re necessarily going to see an uptick on the back of Expo. At best, the market will stabilise.”
Salbak said that declines are expected to continue over the next several quarters, with rents “probably” beginning to stabilise in mid-2020 ahead of the Expo.
“That’s purely on the back of sentiment,” she added. “This is how the market operates and has been operating since 2008 and 2009.”
During Q2, the UAE government announced a number of initiatives aimed at driving economic and stimulating weakened demand in the market.
These included a long-awaited freehold law in Abu Dhabi that allows foreigners to own land within the emirate’s investment areas on a freehold basis for the first time as well as a new permanent residency “golden card” scheme in Dubai that is granted to investors and exceptional workers in a number of sectors.
“These things definitely improve sentiment and are a step in the right direction,” Salbak said. “But they’re not expected to tip the market.”
Salbak added that JLL believes that the UAE needs “some sort of supply controls” as opposed to demand stimulating initiatives.
“There needs to be some regulations to tightly control the growing future supply, particularly in the residential market,” she said. “This could be any kind of control over building permits, for example, to control the level of supply that’s coming.”