Tuesday, March 22, 2016

One of the key UAE real estate events this year was the passing of the long-awaited legislation to better regulate the Abu Dhabi property market. The new law (Law No. 3 of 2015) is a positive step towards standardising practices in the capital’s real estate environment and in turn, increase real estate/property investment in the emirate and across the UAE. The law also looks to tackle the myriad of concerns raised by investors and developers while drawing on the investment experience and landscape of Dubai. Hence, this regulation is considered an important step forward as a source of legal protection for stakeholders.

A key trend that we think will define this year’s UAE real estate market is tightening liquidity. With oil prices remaining low, we think that a general tightening of liquidity will impact real estate/property investment in 2016. Thus, conventional project financing such as bank lending may become difficult, driving developers to seek alternative funding mechanisms such as joint ventures, refinancing, etc. Functionality is likely to emerge as an important factor for occupiers in search of new office spaces. While overall levels of demand are expected to be lower than last year, buildings that offer efficient working environments and other services such as sufficient parking with access to public transport will remain in demand.

 The hospitality industry is all set to evolve and change as overall demand softens this year. As Dubai’s core luxury UAE real estate market transforms into a more broad based hospitality offering, how to operate and gain profitability in 2016 remains to be seen. Another trend that can be expected to emerge this year is a renewed focus on adding value to existing buildings rather than developing new ones. This change is resulting in an increase in demand for fit-out within retail, office and hospitality projects. Occupiers are re-examining their fit-outs as a more cost effective option than moving to a brand new space. Conversely, there seems to be less demand for iconic or less functional buildings.

Moreover, this year, we expect to see a modest rate of growth as the overall economy adjusts to a sustained period of lower oil prices. While new real estate/property investments are in the pipeline, most of this supply is being phased over many years, not in 2016. As people realise that double-digit quarterly or annual price growth are not here to stay, market sentiment and confidence will increase, leading to more transaction activity and healthy and sustainable price appreciation in the UAE real estate market.

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