By Ahmed Alkhoshaibi
Real estate has long been a key economic driver for the UAE and will continue to be in this year, writes Ahmed Alkhoshaibi, CEO, Arada
Let’s be honest; 2018 was a year of mixed fortunes for a raft of different sectors in the UAE and that has affected market sentiment, no matter which way you want to slice it. That being said, there are fundamental reasons to have optimism going into 2019, regardless of subdued and, in some cases, depressed sentiment.
Firstly, it’s important to remember that the International Monetary Fund thinks that UAE’s GDP will increase by 3.7 percent this year, a healthy and sustainable pace of growth that is the envy of many of the world’s most advanced economies. The banking sector is in good shape, with rising profitability and strong capital levels expected to translate into a pick-up in credit growth. I’ve picked five further areas that I think will be key to boosting growth and confidence as we enter an important year for the UAE.
One of the great attributes of the UAE’s local governments is their willingness to make quick changes to regulations when needed. We’ve seen some key changes in laws over the past year, the most prominent of which has been to provide 10-year visas to certain sections of the expatriate population.
This will not only encourage entrepreneurs and students already in the UAE to stay, but it will also encourage top-tier workers and investors from overseas to come to the country too.
Over the course of 2018, we’ve also seen an AED50bn stimulus package from the Abu Dhabi government, another law to allow 100 percent foreign ownership of non-freezone firms, a relaxation on property lending regulations for banks from the UAE Central Bank and more. While all of these were announced last year, I expect the impact from these changes to be felt in 2019, and I’m sure that we can look forward to more amendments in the future as well.
It doesn’t necessarily make the headlines, but foreign direct investment (FDI) into the UAE has remained impressively strong in recent years. FDI inflows to the country were up by 7.8 percent on the previous year to AED37.8bn in 2018, and the UAE alone makes up for almost a quarter of all inflows into the MENA region. That figure is only set to grow following the introduction of the new law concerning foreign ownership of onshore companies, which could see FDI grow by up to 20 percent this year.
I believe 2019 will be the year in which the wider economy starts to benefit from Expo 2020
After a difficult couple of years thanks to the low oil price and government-imposed austerity, the Saudi economy came out of its first recession since 2009 in the first quarter of this year. Jadwa Investment thinks Saudi GDP will reach 2.2 percent in 2018, before dipping slightly to 2.0 percent this year. That’s a marked improvement on the 0.9 percent decline the Saudi economy saw in 2016. In line with the return to growth has come another expanded government budget for 2019, an improved fiscal deficit, increased consumer spending and higher foreign reserves, which rose for the seventh straight month in October.
Why is this important for the UAE? As the Arab world’s biggest economy, Saudi Arabia is an important source market for its neighbour, with Saudi nationals investing heavily in businesses and property across the UAE, as well as visiting the country frequently for tourism and work. This year promises to be even more spectacular for Sharjah, one of the region’s most diversified economies. Not only has UNESCO named Sharjah World Book Capital for 2019, but it is also another Biennial year, with the city showcasing its status as the Middle East’s top cultural hub.
On top of that, the government of Sharjah has just announced yet another record budget, which will see almost AED26bn spent on infrastructure, economic and social development over the course of 2019. That’s a 10 percent rise on the year before, and is an impressive example of the government’s desire to invest even during what some see as a challenging economic environment.
I still see Sharjah as the ‘hidden gem’ of the UAE real estate market. Ever since the government introduced a law allowing the sale of property to all nationalities in 2014, the Emirate has witnessed exceptional growth, thanks to strong demand for integrated, well-designed communities that are reasonably priced. Total real estate transactions rose by 20 percent in 2017 on the previous year, and we’re hopeful that there will be a similar pattern of growth in 2018.
I still see Sharjah as the hidden gem of the UAE real estate market
No outlook on the UAE economy this year would be complete without a mention of Expo 2020. It seems like a long time since Dubai won the right to host Expo, but I believe 2019 will be the year in which the wider economy will really start to benefit.
While construction of the Expo 2020 site is on track and on schedule, there are a host of tenders that remain to be issued for international pavilions, roads and infrastructure, and permanent offices that will remain after Expo. We should see a host of contracts at the Expo site being handed out in early 2019, which will get the year off to a positive start.
For Arada, 2019 promises to be another landmark year. We are about to begin the process of handing over our first ever homes, as units in Phase 1 of Nasma Residences move towards completion. The entire community will be completed in the first quarter of 2020, and we’ll also be launching the first phase of Aljada’s Central Hub, a new leisure and entertainment destination for the UAE, which has been designed by Zaha Hadid Architects, in Q2. As a new company, it’s time for us to deliver on our promises to our buyers and to the Sharjah community.