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21.12.2014
When it comes to Dubai's investment landscape, we have entered a 'new normal,' with focus shifting on cashflow yields rather than asset returns.
As the year comes to an end, it is apparent that things have changed in the UAE's real estate sector. While the beginning of 2014 marked a period of skyrocketing rents and increased attention from investors, 2015 has far more sombre forecasts.
"It is apparent that we have entered a “new normal” in the investment landscape," says Sameer Lakhani, managing director, Global Capital Partners. "The structure of returns for the coming year is likely to come from cashflow yields rather than asset returns. Investors have to adjust their expectations to this new normal, or risk being disappointed as they chase trends to their ruin."
Firstly, with at least 20,000 new residential units that will be added to the supply of houses, there is bound to be an impact on sales and rental rates. According to the global real estate consultancy CBRE, the increased supply will have a deflationary impact. Moreover, research from Cluttons shows that villa prices in Dubai will also continue to go down in 2015 with the cap on mortgage lending to home buyers being the biggest factor in the slowdown.
Secondly, the UAE's property market will be impacted by the dramatic fall in oil prices. In fact, according to Peter Cooper, editor, ArabianMoney.net, the UAE will be in a recession next year. However, he is quick to point out that this will be different from 2008 with the UAE putting a brake on the housing boom. He notes that despite the recession, the UAE will "remain in demand as a safe haven."
The next year promises interesting changes in the UAE's rental market and is an important year for shaping the direction the country's economy is heading in. While the UAE may see some fluctuations with declining oil prices, “the property market here has reached a situation similar to London’s … overseas investors buy in for the safe haven environment,” says Nicholas Maclean, managing director, CBRE Middle East. New market players have to be cautious about the change in the playing field. Armed with that knowledge, they are bound to be rewarded in the upcoming year of change.
As the year comes to an end, it is apparent that things have changed in the UAE's real estate sector. While the beginning of 2014 marked a period of skyrocketing rents and increased attention from investors, 2015 has far more sombre forecasts.
"It is apparent that we have entered a “new normal” in the investment landscape," says Sameer Lakhani, managing director, Global Capital Partners. "The structure of returns for the coming year is likely to come from cashflow yields rather than asset returns. Investors have to adjust their expectations to this new normal, or risk being disappointed as they chase trends to their ruin."
Firstly, with at least 20,000 new residential units that will be added to the supply of houses, there is bound to be an impact on sales and rental rates. According to the global real estate consultancy CBRE, the increased supply will have a deflationary impact. Moreover, research from Cluttons shows that villa prices in Dubai will also continue to go down in 2015 with the cap on mortgage lending to home buyers being the biggest factor in the slowdown.
Secondly, the UAE's property market will be impacted by the dramatic fall in oil prices. In fact, according to Peter Cooper, editor, ArabianMoney.net, the UAE will be in a recession next year. However, he is quick to point out that this will be different from 2008 with the UAE putting a brake on the housing boom. He notes that despite the recession, the UAE will "remain in demand as a safe haven."
The next year promises interesting changes in the UAE's rental market and is an important year for shaping the direction the country's economy is heading in. While the UAE may see some fluctuations with declining oil prices, “the property market here has reached a situation similar to London’s … overseas investors buy in for the safe haven environment,” says Nicholas Maclean, managing director, CBRE Middle East. New market players have to be cautious about the change in the playing field. Armed with that knowledge, they are bound to be rewarded in the upcoming year of change.
