It isn’t a surprise that the residential real estate market has grown more competitive over the last couple years. Off plan launches have grown significantly during that time, driving transaction volumes in 2017, but with growing competition and weak consumer confidence, prices have been on the decline.
Where in the world should GCC investors buy property?
We spoke with three of the region’s real estate analysts – Head of Research & Consultancy at CBRE Middle East, Matthew Green, Head of Research at JLL MENA, Craig Plumb, and senior analyst at Knight Frank, Taimur Khan – about how they see the market right now, and how they expect initiatives from both developers and the government to stimulate sales to affect its future.
Here’s what they had to say:
2017-18 so far
CBRE: Q1 2018 transaction numbers are lower than those in Q4 2017 but still well above the same in Q1 2016. This is propelled by sustained appetite from international investors including an increasing number of Chinese investors.
Frank Knight: Prices have fallen 4.8 percent across Dubai on average in Q1 2018
CBRE: Developers such as Emaar are generating better off plan sales with new launches than the wider market which is more constrained.
Knight Frank: Prime markets have been relatively resilient in terms of price performance. Prime residential prices in the year to March 2018 fell on average by 2.6 percent, They fell 5.5 percent in 2017.
Waiving DLD Fees
CBRE: Developers have become more creative with sales strategies. Investors should carefully read between the lines when assessing any offer, ensuring that the overall package still represents value against what is readily available in the secondary market and or from other competing projects. Ultimately, properties being sold with a bundle of unrelated products or those which promise guaranteed returns, are often just creative marketing, with the additions already factored into the sale price.
JLL: All real estate transactions in Dubai are subject to a registration fee of 4 percent of the agreed sale price. As market conditions have softened over the past two years, more developers are now offering to pay this fee on behalf of purchasers, effectively reducing the overall gross price by 4 percent. There is strong competition among developers to attract potential buyers in the present market and it is therefore certainly not possible for them to offset this fee by charging higher prices for units. Quite the opposite is the case.
CBRE: With new supply, the market will retain deflationary pressures in the rental sector in the run up to 2020. However, there has been a lot of government intervention in recent months, with various measures and new regulations to stimulate growth, increase jobs, boost competitiveness, and increasing the level of FDI. In time, we expect this will trickle down into the real economy and translate into more positive fundamentals for the real estate market as a whole.
JLL: New supply continues to be launched and average sale prices have fallen around 4 percent since 2017. Trend for more discounts is likely to continue, further eroding developer profit margins.For all the latest real estate news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.