Granting freehold property rights to non-UAE nationals could help the Northern Emirates shake off a housing slump that has seen rents fall sharply over recent years, according to a report by the property consultancy CB Richard Ellis (CBRE). Sharjah has suffered the steepest decline, with rents for a three-bedroom apartment falling more than 50 per cent over the past two years, the report said.
Apartment rents in Ajman, Umm al Qaiwain, Ras al Khaimah and Fujairah have declined by between 15 and 50 per cent over the same period. Larger, high-end units have experienced the biggest falls. Non-UAE nationals are not allowed to own a property in Sharjah under current law, although they are in Ajman and Ras al Khaimah. Umm al Qaiwain and Fujairah have select freehold sites where foreigners can own property.
"Such a legislative change could positively impact upon sales activity and help transform the fortunes of the market," the report said, referring principally to Sharjah. Residential lease rents declined for the first six months of the year "largely as a consequence of prevailing low demand levels and an ever-growing supply of stock ready for occupation", it said. Property brokers have described a broad migration of residents in the UAE following the decline in rental rates. Residents who had sought out Sharjah and Ajman for cheaper accommodation were able to find comparable prices on the outskirts of Dubai, while wealthier individuals upgraded to bigger homes or better locations.
The impact of the downturn that started in Dubai and spread across the country shows markets are heavily intertwined. Abu Dhabi's property market is inextricably linked to Dubai's, as residents of the capital relocate to Dubai and commute to work. The same goes for Sharjah, which was once a cheaper "dormitory city" catering to Dubai's booming economy. Offices in the Northern Emirates have also seen prices slide, particularly in areas affected by traffic congestion and unreliable infrastructure.
Power cuts have plagued the north for years as new buildings came on to the electrical grid. Last month, areas across Sharjah suffered lights cutting out and air conditioning juddering to a halt for hours at a time. Hospitals treated four times the normal number of heat-stroke patients. Sharjah Electricity and Water Authority apologised, but further cuts have since occurred. "The quality of existing infrastructure in the Northern Emirates is a key concern for residents and businesses, and remains arguably the single largest challenge for the real estate sector as a whole," CBRE said yesterday.
"Beyond power issues, some buildings still do not have sewerage or water connections - leaving both buyers and developers in limbo." But a federal allocation of Dh4.6 billion (US$1.25bn) towards improving infrastructure could go some way to reduce the issues. CBRE forecasts that leasing and occupancy rates would decline for the rest of the year, especially as more than 37,000 square metres of office space and 7,000 units are delivered in Sharjah alone. "The sheer volume of these new real estate offerings is expected to further drive down lease and occupancy rates, against the continued backdrop of weak demand and heightened competition," CBRE said in its report.