No New Year cheer for UAE property market

Abu Dhabi rents are expected to drop by 5 to 7 percent and Dubai property values are expected to decline by 3 to 5 percent in 2018 (Shutterstock)
Updated 31 December 2017

No New Year cheer for UAE property market

LONDON: It is that time of year when the Gulf’s plethora of real estate pundits look into their crystal balls to see what the future might hold.
Last year was a particularly difficult for the region as it contended with weak oil prices, political tensions and volatile investor sentiment. The introduction of value-added tax in Saudi Arabia and the UAE from 2018 will inject yet more short-term uncertainty into the market, some commentators have said.
However, as the global price of crude picks up, the economic growth prospects of the region’s oil-exporting countries are projected to improve in 2018.
The latest IMF forecast for 2018 expects Gulf gross domestic product (GDP) growth to rebound to 3.3 percent, largely driven by a turnaround in the UAE, Saudi Arabia and Kuwait.
But whether this new economic confidence filters into the real estate market remains to be seen — with further declines forecast in the UAE’s two main property markets, Abu Dhabi and Dubai. Arab News takes a look at how the two markets are looking this year.
Dubai: A mixed bag with hopes of a “bottoming out” in 2018
According to a report by property consultancy Cluttons, the three years up until winter 2017 were “very challenging” for Dubai’s residential market, with capital values dropping by 16.6 percent. Residential values were estimated to end 2017 down 5 to 7 percent on 2016 numbers, the consultancy said.
“The introduction of Federal Mortgage Caps and the collapse in oil prices during 2014 have been key catalysts in shaping the market over the last 36 months, alongside the deteriorating global geopolitical backdrop, which also spooked investors,” Cluttons said in a report.
Around 40,000 more residential units will be completed in Dubai in 2018, according to the Property Monitor Supply Tracker. This may put further pressure on rent and sales prices, in particular the secondary market, analysts have said.
According to Cluttons, 2018 still has the potential for values to start “bottoming out” in the second half of the year, but much will depend on the yet-to-materialize “Expo 2020 effect,” the strength of the US dollar and a slowing in both the rate of delivery and type of new residential schemes announced, with “affordable” housing being key to helping the market stabilize.
“On balance, we expect values to decline by an average of 3 percent to 5 percent (in 2018),” Cluttons said. “The rental market is expected to mirror the performance of capital values in 2018.”
According to Cluttons, low-end apartments and villas encompassing the city’s most affordable locations such as International City, IMPZ, Discovery Gardens, Jumeirah, Sports City and JLT, collectively registered no change in average rents in the third quarter of 2017, highlighting “the potential depth of demand for more affordable rental accommodation going into 2018.”
Syed Wajih, a property consultant at Better Homes Dubai, told Arab News: “This is a temporary dip and it’s the best time to buy. The prices are low because of the oil price, VAT uncertainty and uncertain sentiment, but there is a lot of movement now because of the low prices.”
Abu Dhabi: Gloomy market with falling property prices
According to JLL, Abu Dhabi residential rents and sales prices dipped in the third quarter of 2017 as vacancies increased in response to subdued demand and increased supply. Rental demand has been negatively impacted by job losses and cuts in housing allowances while suppressed sentiment has resulted in fewer sale transactions, the consultancy said.
JLL said apartment rents declined by around 13 percent on a year-on-year basis in the third quarter due to the “continued increase in vacancy rates, resulting new supply completions during a period of job losses and cuts in housing allowances.”
Residential vacancies are expected to increase further in 2018, causing further rental declines, the property firm predicted.
Residential prices have also continued to fall, with average prices for prime villas declining 8 percent in the third quarter, down 13 percent year-on-year, said JLL.
“Declining sentiment and reduced transaction volumes have driven these falls with average prices expected to decline further during 2018,” it said.
The latest Abu Dhabi property report from Cluttons noted: “Weaker economic growth has taken its toll on the hydrocarbon sector in particular, which has been a key driver of demand in the residential and commercial markets in the emirate historically.”
Cluttons added: “(2018) is likely to see rents slipping further, with newly completed buy-to-let stock becoming a particular challenge in some of the city’s newer neighborhoods.”
The firm predicts that Abu Dhabi rents are likely to drop by 5 percent to 7 percent in 2018, “unless there is a notable rebounding in economic growth.”


China's aviation regulator raised concerns with Boeing on 737 MAX design changes

Updated 12 December 2019

China's aviation regulator raised concerns with Boeing on 737 MAX design changes

  • China is reviewing the airworthiness of the plane
  • China was first country to ground plane in March

BEIJING: China’s aviation regulator raised “important concerns” with Boeing Co. on the reliability and security of design changes to the grounded 737 MAX, it said on Thursday, but declined to comment on when the plane might fly again in China.
China is reviewing the airworthiness of the plane based on proposed changes to software and flight control systems according to a bilateral agreement with the United States, Civil Aviation Administration of China (CAAC) spokesman Liu Luxu told reporters at a monthly briefing.
He reiterated that for the plane to resume flights in China, it needed to be re-certified, pilots needed comprehensive and effective training to restore confidence in the model and the causes of two crashes that killed 346 people needed to be investigated with effective measures put in place to prevent another one.
China was the first country to ground the 737 MAX after the second crash in Ethiopia in March and had set up a task force to review design changes to the aircraft that Boeing had submitted.
The US Federal Aviation Administration (FAA) will not allow the 737 MAX to resume flying before the end of 2019, its chief, Steve Dickson, said on Wednesday.
Once the FAA approves the reintroduction into service, the 737 MAX can operate in the United States, but individual regulators could keep the planes grounded in other countries until they complete their own reviews.
“Due to the trade war, the jury is still out on when China would reintroduce the aircraft,” said Rob Morris, Global Head of Consultancy at Ascend by Cirium.
Chinese airlines had 97 737 MAX jets in operation before the global grounding, the most of any country, according to Cirium Fleets Analyzer.