Property market outlook for Emirates improves

Sales in the UAE are expected to rise this year and there will be increases in rents and prices in the residential market in some locations in Dubai, according to Jones Lang LaSalle. Mike Young / The NationalShow less

Property sales in the UAE are expected to rise this year and there will be increases in rents and prices in the residential market in some locations in Dubai, according to Jones Lang LaSalle.

"For good quality or prime residential [rents in Dubai] we believe that the market is very close to the bottom and by the end of this year we'll be at the position that we'll start to see some recovery as a whole sector in 2013," said Craig Plumb, the head of research at Jones Lang LaSalle Mena.

The property brokerage added there would be greater variance in rental trends this year, with rents for homes in some developments staying stable, with prices for others falling and a few increasing.

For example, in a district such as Dubai Marina, there were already diverging rental patterns, with rents for some buildings declining, while others were increasing, said Jones Lang LaSalle.

Sales activity was also likely to pick up, the brokerage said. "With increasing investor interest in the UAE market, a higher volume of transactions are expected in 2012, with this growth being driven by private investors and high net-worth individuals rather than investment institutions."

Alan Robertson, the chief executive of Jones Lang LaSalle Mena, expected sales to pick up.

"We think we will see increased activity in this sector as more confidence returns to the residential sector, perhaps with the UAE continuing to be a beneficiary of the Arab Spring as a relative safe haven, and as more projects get completed and handed over." The picture is also mixed in terms of property prices, although the sales market has generally been outperformed by the rental market. Villa prices in some areas increased marginally last year from 2010, according to data from the company.

"The average asking price for three-bedroom villas in the projects monitored within Palm Jumeirah, Arabian Ranches and The Springs have increased marginally over the year at 5 per cent, 8 per cent and 1 per cent, respectively," Jones Lang LaSalle said.

"Palm Jumeirah remained the most expensive villa location with an average asking price of Dh15,160 [US$4,127] per square metre in [the fourth quarter]." But apartment prices fell 9 per cent to Dh8,960 per sq metre in the fourth quarter compared with the same quarter in 2010.

A similar view of the market was voiced by Global Investment House. "Dubai selling prices of residential units should bottom out by [the first half of this year] but is still off from a general price appreciation as the market will remain overflowed with excess supply," Global said. After this year, there was likely to be a slowdown in property coming into the market as the Government has brought this into control, allowing for a faster recovery, Jones Lang LaSalle said.

There is still room for further declines in rents in Abu Dhabi, particularly for apartments, according to the brokerage. "The residential market in Abu Dhabi has not adjusted as much to market conditions in 2011 as Dubai," said Mr Plumb. "There is still significant difference in the rents in Abu Dhabi and Dubai.

There also remain risks for the region as a whole. "There's also one potential new factor that could come along and that's Iran," said Mr Robertson.

Jones Lang LaSalle's predictions are based on the assumption that Iran does not become involved in a major armed conflict or close the Strait of Hormuz, he added.

Given Iran's proximity to the UAE, a major conflict there could affect the perception of the UAE as a haven, Jones Lang LaSalle said.

Such a scenario would, said Fadi Moussalli, the regional director for Jones Lang LaSalle Mena, "hit the confidence in the UAE economy on one side and the impact on the real estate prices would be negative.

"However, oil prices would shoot up as a result of those tensions and therefore in this way it would benefit the UAE [as] a major oil exporting economy."