Socio-economic trends impact UAE and Saudi real estate
Changing socio-economic conditions are challenging the Gulf’s real estate developers, but proactivity could help builders succeed in the years to come, Neha Bhatia reports
The word ‘dynamic’ is often overused in marketing communication, but given its recent displays of adaptability, the Gulf’s real estate market has proven itself worthy of the adjective. More foreign investors are turning to the region’s most popular commercial hubs, such as Dubai and Riyadh, to expand their businesses or secure their personal investments. Consumption trends are also evolving in the region, with young buyers influencing how malls, homes, and offices are designed.
In particular, 2018 has been a positive year for companies that have delivered properties consistently over the last decade, such as Emaar Properties, Aldar Properties, Dar Al Arkan, Al Mazaya Holding, and Damac.
The UAE has held steady as the Gulf’s most popular property market, with billions of dollars being invested in Dubai’s real estate sector of late. UAE nationals top the list of Dubai’s biggest investors, with 2,986 investments worth $1.8bn (AED6.8bn) recorded in the first half of 2018.
A study revealed by Dubai Land Department this July showed that Indian nationals ranked second, with investments amounting to $1.6bn (AED5.9bn) through 3,218 transactions. H1 2018’s investments in Dubai real estate topped $30bn (AED111bn).
However, the UAE’s property sector is also adapting to new market demands. For instance, local businesses are found to be opting for ‘flexible’ real estate as volatile market conditions increase their operating risk and reduce cost-efficiency.
A study by International Workplace Group, released this August, found that 91% of its 18,000 respondents believe flexible working “helps them to grow their business and maximise profits”. Meanwhile, 84% of the UAE’s business leaders said flexible workspaces helped them “mitigate against […] financial and strategic risks”. Additionally, 84% of the study’s respondents said flexible working helped them better manage “volatile markets”, and 87% believe it would help with cost-optimisation.
Buyer demands are similarly changing due to market “volatility” in Saudi Arabia, causing developers to more creatively build, market, and maintain their products, as Abdulrahman Almofadhi, chairman of Al Akaria Saudi Real Estate Company (Sreco) told Construction Week this August.
“Recently, developers have suffered from price volatility creating additional complexity in the planning phases,” he explained. “This has been compounded by changing consumer preference, with many people choosing apartments over traditional villas. In addition, developers have to contend with the unregulated construction of private family homes, where systems are lacking and finishes are poor quality, which account for a sizeable chunk of the residential housing market.”
It is hard to predict what comes next for the GCC’s development companies in the changing socio-economic landscape. However, firms that promptly respond to contemporary and future market changes will certainly find themselves at the top of the table in the years to come.