UAE stimulus efforts announced this week are needed as housing oversupply trend continues
Real estate prices have been on the decline for the last three years due in large part to oversupply from the off-plan market, and not enough demand to meet handovers.
33,000 units were delivered over 2016 and 2017 in Dubai, with 2018 forecast to deliver much the same. Stimulus efforts to attract investment and retain residents are much-needed, according to Lynnette Abad, Director of Data & Research at Propertyfinder Group.
Those monitoring the headlines recently will have noticed a volley round of new initiatives that are set to boost the real estate sector in the UAE.
First, the visa and company ownership reforms set for the end of this year. Then, the Dubai Land Department’s efforts to bring real estate transactions online and cut out red tape by Q1 2020. Then, this week, Dubai and Abu Dhabi went back and forth on their own economic stimulus plans.
“We have seen the market shift in different ways over the last few years, a significant amount of supply was released into the market and majority of sales in 2017 were on off-plan units [70%],” says Mrs. Abad.
“The amount of new supply in the market has put pressure on sale and rental prices with both declining over the last three years. This is not necessarily a bad thing, as the cost of living in Dubai has been relatively high, therefore a decline in prices have helped many households,” she adds. “The new proposals will continue to relieve the pressure put on by simple cost of living.”
The AED 50 billion stimulus package for Abu Dhabi, announced earlier this week by Crown Prince Sheikh Mohammed bin Zayed, will attract longer-term residents and cut costs for developers.
Of particular interest for the real estate sector and residents is the creation of permanent home licences for working from home, instant licensing for most commercial license types and all government services, new faster payments for private sector contractors and a review of fines incurred by delays they cause, and a cost-cutting review of building regulations for residential and commercial properties. Further detail on these initiatives is expected within 90 days.
For Dubai, the school fees freeze for the upcoming academic year may ease the burden in households already feeling the pinch of VAT, and encourage people to stay in the country longer.
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Dubai Land Department has also been asked to get rid of the late-fee penalty on the 4 per cent registration fees on property transactions in the emirate, part of a growing effort to slash fees overall in the emirate. “The real estate sector is an important component of Dubai’s economy and we are providing the best government services to investors and developers,” said Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of the Dubai Executive Council..
Off-plan Handovers in Dubai
- 7800 units delivered so far this year
- 8000 more expected to be released by end of year
- 31,000 proposed units
- 14,500 delivered
Materialization rate: 47%
- 34,000 proposed units
- 18,000 delivered
Materialization rate: 53%