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UAE property market has slowed due to maturity

by Jumana Abdel-Razzaq on Feb 16, 2018

Cian Farah, CEO Aurora Real Estate Development.
Cian Farah, CEO Aurora Real Estate Development.

The UAE’s property market will continue to see an average softening of prices and rental rates in 2018, though experts believe this will bring the Emirates more in line with global norms.

With investors having become more willing to accept lower yields, and landlords beginning to offer more flexible incentives to tenants, industry leaders are signaling towards a maturing market.

“The property market in Dubai has matured, and with this maturity comes stability,” Cian Farah, CEO of Aurora Real Estate Development told Construction Week in an interview. 

“This has resulted in a relatively low level of supply which has helped minimize the price declines over the last three years,” Farah said.

According to the Property Monitor Index, on average, apartment, villa, and townhouse sale prices saw a marginal decline of 2% in 2017. Residential rents declined at a more pronounced rate of 4%, resulting in a yield compression for most communities.

Roughly 20,000 units were delivered in 2017, and another 80,000 units are expected to be handed over in 2018, though there is an expected realisation rate of 30%-35% based on historic performance.

Jumeirah Village Circle and Dubai South recorded the highest number of off-plan transactions among the city’s freehold communities due to their growth potential and strong yields.

“We have even seen price increases in these locations, so we cannot generalise the market,” Farah said.


“The market has slowed down due to its maturity – and while some may see it as a weakening market, I don’t,” he continued.

“I see it as a sign of a new era, where developers have to work harder to compete, which in turn takes the professionalism in the industry to a whole new level, and results in better properties being brought to the market.”

In January, Cavendish Maxwell’s Jonathan Brown also said that declines in rent and prices are signs of the UAE real estate market’s continued maturation.

“Referring to the 11 years that I’ve been in Dubai, the market continues to mature. The fact that rents are coming down…slightly quicker than prices is a reflection of the maturing market,” he said. “It’s a less volatile market where investors are willing to accept lower yields."

“There’s less risk being built in, and people have far more confidence over the longevity and sustainability and long-term outlook of Dubai,” Brown added. 

For the investors focusing on yield, the top performing areas last year were Jumeirah Village Circle with gross rental yields of 9.2%, Discovery Gardens at 8.9%, and International City at 8.6%, according to Farah. 

Jumeirah Village Circle saw a 4% growth rate last year and also delivered strong rental yields of approximately 8%.

For a more long-term view, he notes that Dubai South is “hugely appealing” both for industrial investment as well as studios and one-beds, with new upcoming areas in Jebel Ali and Dubai Creek Harbour also growing in popularity.

“It is therefore key that developers don’t over stretch themselves and focus on deliverability, as potential investors are now very careful where they invest,” Farah added.