Latest TASWEEK study says income vs. liability will affect real estate trends in 2012

TASWEEK Real Estate Marketing & Development, a property adviser and solutions provider in the Middle East, expects financial obligation or income versus liability to dictate real estate trends in 2012. The prediction – along with a generally positive industry outlook for this year – is included in TASWEEK’s latest analyses of the Abu Dhabi and Dubai markets. The company recently culled data from key areas of the residential and commercial segments and evaluated their rent and buy rates for 2011.

Abu Dhabi

Abu Dhabi experienced a steady increase in unit introductions in 2011, leading to significant declines in rental rates especially in areas outside of the city proper such as Mohammed Bin Zayed City which offered a bigger supply of new buildings.

As with the other emirates and cities, rent in Abu Dhabi Island has been sliding over the past two years. Because of the dearth in new housing units, many tenants relied heavily on the opening of Al Reem Island and its anticipated market effects. Residential yield averaged 10.5 per cent across all residential categories in 2011, with price drops outpacing a rental slide. Commercial yield, on the other hand, averaged 12.5 per cent.

The phenomenon of rising supply within the island is expected to spill over to the first quarter of 2012 with developments such as the introduction of more than 5,000 residential and office units in Al Reem and the completion of various projects in the Rawdet and port areas.

Abu Dhabi’s building owners are currently offering various promotions for both new and old buildings. These include the waiver of the annual 5 per cent rental increase; acceptance of monthly and quarterly installments; free unit finishing and renovation; waiver of electricity and water payments; and one or two month grace periods.

Dubai

Dubai’s real estate business rallied to achieve an impressive stability in prices last year, posting an increase in total volume of AED 143 billion. This indicates a gradual return to market confidence which is expected to continue in 2012.

Rental prices particularly stabilized at the Dubai Marina, the Greens, Al Barsha and downtown Dubai. Declines of between 5 and 15 per cent were recorded in areas such as Discovery Gardens, Jumeirah Lake Towers and Silicon Oasis, however.

TASWEEK expects average returns to hover at between 5 and 8 percent and between 10 and 12 per cent for the residential and commercial sectors, respectively. The entry of new supply may put pressure anew, with the largest reduction to affect low-quality units and improperly maintained properties. The company does, believe, though, that the sector has not bottomed out and can enter sustained recover via macroeconomic changes that spur job and wealth creation. Such changes will create new opportunities for long-term investors as rental yields over the past three years have still been above 8 per cent.

Conclusion

Financial obligation or the ‘income versus liability’ factor will determine pricing and other trends in 2012 aside from supply and demand. The level of financial awareness among landlords and owners will dictate the sustainability and health of the real estate sector. Overall, though, this year is looking to be a turning point for the UAE’s real estate market. While Abu Dhabi faces increased supply, more good promotions and broader offerings beyond the island, Dubai is enjoying increasing stability and a steady return to confidence that can be accelerated even further with strategic macroeconomic changes. The coming months could handsomely reward loyal investors, owners and tenants who have continued to put their faith in one of the region’s most active property markets.