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United Arab Emirates Real Estate Report Q4 2011
Business Monitor International, Sep 2011, Pages: 62
United Arab Emirates Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on United Arab Emirates's Real Estate industry.
Increasing tourism, strengthening investor confidence and the tentative shoots of lending in progress show that the UAE is getting to the end of its real estate industry crash. GDP growth may well be small in 2011, but it is positive.
However, the state remains plagued by huge amounts of unoccupied property. The UAE's commercial real estate sector remains under pressure from failing rents. In H210 the quoted maximum and minimum rental levels for property across the board had dropped. However, when BMI spoke to its in-country sources again in the middle of 2011, rents had diverged. Maximum rents in the three sub-sectors in Sharjah had rocketed. The other two emirates had a mixed bag of results. The office rents continue to decline a little in Dubai and substantially in Abu Dhabi – by more than half. Conversely, retail rents rose in both, with the same pattern of movement in Dubai and a nearly 40% increase in Abu Dhabi. Industrial space commanded a moderate rise in rents in Dubai and a moderate decline in Abu Dhabi.
According to BMI's in-country sources, rents across the board are likely to remain stable through the rest of 2011, at minimum and maximum levels. Considering the huge variations in previous half-years and by city and sub-sector, this may not be entirely likely. They do however, expect them to diverge again in 2012.
Some key opportunities in the real estate market are:
- Plenty of development projects are being restarted, including Dubailand, one of the most ambitious developments ever conceived. Following an evaluation, the plans are to relaunch the large leisure project backed by Dubai Properties Group by the end of 2011.
- Investor confidence has improved as they become more comfortable with the emirate's debt situation. The latest FPI investor attitudes report shows investor confidence in the UAE has risen 5 points to 18, according to the Arabian Gazette in July 2011. Dubai Holding, a struggling state-owned entity repaid a US$317.6mn bond and Dubai Aerospace refinanced debt and debt sales from the Dubai government and Emirates airline.
- Legislation is improving for property buyers and investors. Laws now protect investors' interest. According to Jones Lang Lasalle, the three-year residency visa for property owners is a new tenancy registration system ‘Tawtheeq', where a buyer can register their property when purchasing, whether it is completed or purchased off plan and during the handover when they receive the title deeds. There is also a new law limiting overcrowding in residential properties.
Some key risks to the real estate market are:
- Some UAE real estate companies remain in significant financial trouble through 2011. Al- Habtoor Leighton said in April 2011 that it needed AED4bn to safeguard its future projects in the Gulf following writedowns and delayed payments from clients, according to Arabian Business. The company's parent, Australian company Leighton Holding, had to raise AUS757mn from shareholders to fund an injection of AUS272mn into the UAE subsidiary, following the announcement that the firm was owed more than AED4bn for completed projects.
- The UAE's construction industry has looked to other states to take advantage of their governments' large-scale infrastructure projects. Arabtec reported in Arabian Business that it is planning growth of its Saudi Arabian workforce to 2,500 in June 2011.
- RERA (Dubai's real estate watchdog) lists 300 projects that have stalled or been cancelled and according to Arabian Business in August 2011, is reviewing the financial viability of about 90,000 properties due to be delivered over the next five years. Out of the projects it is investigating Nakheel, the struggling development behind the offshore Palm Jumeirah in Dubai, is the lead on 107 projects and the article says state-backed Dubai Properties has 42 projects that are on hold.
- The state government needs to focus on offering long-term subsidies to investors, such as discounts on municipality fees and electricity for up to 10 years, in a bid to boost the construction industry.
- The UAE central bank announced that lending to the country's real estate sector declined by 1.4% between January and May 2011, according to Zawya. Credit levels have been affected by the continuing problems caused by the global financial crisis and the political unrest in other parts of the Middle East.
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