The United Arab Emirate (UAE) residential real estate market is expected to spend 2012 in the doldrums, according to Jones Lang LaSalle. Oversupply is depressing price increases and rents in nearly all sectors and improvement is not forecasted until next year. Rents experienced a 3% bump in the fourth quarter, while average house prices fell 9% for the year. Analysts believe the lower prices will eventually spur more sales and in turn drive up prices, but the turnaround will take some time. For more on this continue reading the following article from Property Wire.
The residential property market in the United Arab Emirates is expected to bottom out in 2012 but there won’t by an improvement until 2013, according to real estate consultants.
The Gulf’s worst performing real estate market will peak in terms of its sliding rents over the next 12 months, despite the estimated 38,000 units due online in Dubai in 2012, according to Jones Lang LaSalle.
‘The rental market has generally performed better than the sales market during 2011, with asking rents having stabilised and now improving,’ the company said in its latest report.
Villa rents increased 11% in the fourth quarter, compared to the previous three month period, and were 16% higher than the year earlier period, it shows.
Apartments, which made up 90% of new stock in 2011, saw a 3% rise in rents in the fourth quarter, and were only marginally down on the year earlier period.
Oil rich Abu Dhabi is expected to see property rents remain steady but is unlikely to see the same price climb as Dubai amid a pipeline of 28,000 units due online this year, JLL said.
‘Due to the significant development pipeline, rents will continue to experience downward pressure. This will help decrease the rent premium that Abu Dhabi has maintained over Dubai to date,’ the report said.
The news was negative for house prices, however, with JLL forecasting an ongoing decline in rates, particularly among apartments in Dubai.
Average prices fell 9% year on year to AED 8,960 per square meter in the fourth quarter of 2011, with flats in Burj Dubai Downtown and Dubai Marina seeing falls of around 11%.
Though the UAE will see an increase in property transactions over the next year, driven by private and wealthy buyers rather than institutions, this won’t translate into an increase in house prices, JLL said.
‘Lower prices, more choice of higher quality product and its role as a regional safe haven will increase the attractiveness of the UAE market to both occupiers and investors in 2012,’ the report said.
‘We can expect more positive signals from this year, with some of the key words being affordable housing, new realism, tenant friendliness and sustainability across the UAE real estate market,’ it concluded.
This article was republished with permission from Property Wire.