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Lease investment yield vs. capital gain options revealed by TASWEEK's Q1 2015 UAE real estate report

UAE, March 29, 2015 - Property leasing and selling prices remained relatively stable for the first quarter of 2015 according to the latest market intelligence report from TASWEEK Real Estate Development. The trend is in anticipation of the awarding of mega projects in Abu Dhabi and Dubai which are expected to attract more professional human resources and influence a rise in demand for luxury units until the end of the first half of this year.


TASWEEK noted a number of factors currently influencing industry movements and decisions, including the growing popularity of ‘smart’ homes and real estate -related technologies, the slowing of transactions due to oil price and currency exchange fluctuations, and the emergence of a more affordable market segment offering price ranges below AED 1 million led by developers such as Dubai’s Nshama. Overall, TASWEEK expects a ‘wait and see’ sentiment for most developers in the short term. 


“Market movements were steady and deliberate across the UAE during the first quarter, with most developers adopting a ‘wait and see’ attitude that we expect to carry over in the coming couple of months. There are a lot of positive indicators for growth and new opportunities, though, such as the increasing popularity of the ‘smart living’ concept and the introduction of more affordable price ranges. We are optimistic that the local industry will post a strong performance this year and rise above local, regional and global challenges behind the promising trends witnessed in the first few months of 2015,” said Masood Al Awar, CEO, TASWEEK Real Estate Development and Marketing.

Abu Dhabi

TASWEEK predicts a correction in the price of free hold units in Abu Dhabi following Tamouh’s announcement of the start of unit sales of its ‘City of Lights’ in Al Reem Island Towers. This is the initial phase of Tamouh’s second project, which includes nine (9) towers - two (2) for offices and seven (7) for residential tenants comprising 2,400 housing units. The units are freehold and not for hire. Prior to the announcement, the units were priced less than their counterparts at rates ranging between 10 and 15 per cent.

The local residential market was stable for the first two months of 2015, although landlords kept protecting rental levels by reducing supply. Demand is still high after the removal of the rental cap along with the return of government employees to the emirate in Q3 2014. The market will continue to correct prices between old tenants and new leases until the local government issues a rental map to control the market. Overall, residential rental prices rose 2 per cent in Abu Dhabi Island and 3 per cent in freehold areas outside the mainland.

Buyers can get the best average per-square-foot apartment rates at downtown Reef (AED 1,000); Marina Square and Saadiyat Beach (AED 1,450); and Al Raha Beach as well as Al Reem Island’s ‘Sun & Sky’ and ‘The Gate’ (AED 1,550). Hydra Village and Al Reef Villas offer 2-bedroom apartments at AED 1 million and AED 1.5 million, respectively, while 3-bedroom units go for as low as AED 530,000 in Saadiyat Beach Villas, AED 1.4 million in Hydra Village, and AED 2.1 million in Al Reef. Al Reef also offers the top deals in 4- and 5- bedroom apartments at AED 2.5 million and AED 3 million, respectively.

As for office rentals, transactions remained weak due to a combination of excess supply and less demand. The slump is reflected in the 5 per cent slide in new commercial licenses issued in Abu Dhabi over the same period last year. A total of 1,760 were issued from January to February 2014, compared to 1,700 issued so far this year. Average prices for high-end commercial units reached AED 2,200 per sq ft, down from last year’s AED 2,500, while mid-quality office space averaged AED 1,300 per sq ft from 2014’s AED 1,500.

Dubai

Dubai-based developer Nshama will be selling townhouses for less than AED 1 million in its Town Square development, ushering in a new affordable housing segment. Located at the intersection of the Al Qudra and Emirates Roads, Town Square will comprise over 3,000 townhouses ranging from 2,153 to 2,422 square feet per unit, 18,000 apartments, 350 shops, one Vida hotel, parks, healthcare facilities, schools, and cycling trails. Delivery is expected by 2017.

As projected by TASWEEK in Q4 2014, the first two months of 2015 saw continued stabilization in Dubai’s residential sales and rental markets. Transactions slowed down 20 per cent in January and 17 per cent in February compared to the same months in 2014. This indicates consumer patience and growing confidence for the future. On average, sales prices dipped slightly by 2 per cent from Q4 2014, while rentals were almost the same.

Based on government data showing an average daily issuance of 100 new commercial licenses, TASWEEK predicts that new demand will absorb existing and future supply, and that prices will remain at the same levels next quarter.

International City offers the lowest rental rates at AED 38,000 for studio units and AED 53,000, AED 70,000 and AED 100,000 for 1-, 2- and 3-bedroom apartments, respectively. Dubai Silicon Oasis also has good studio (AED 47,000), 1-bedroom (AED 57,000), 2-bedroom (AED 90,000) and 3-bedroom (AED 133,000) deals. Tenants can also opt for Discovery Gardens (Studio – AED 59,000 / 1-bedroom – AED 76,000 / 2-bedroom – AED 104,000 / 3-bedroom – AED 118,000). 

As for sales, the best spots are Dubai Silicon Oasis (Studio – AED 493,000/ 1-bedroom – AED 694,000 / 2-bedroom – 1.025 million / 3-bedroom – AED 1.996 million); Discovery Gardens (Studio – AED 555,000/ 1-bedroom – AED 690,000 / 2-bedroom – 1. 25 million / 3-bedroom – AED 1.8 million); and Sheikh Zayed Road (Studio – AED 555,000/ 1-bedroom – AED 819,000 / 2-bedroom – 1. 136 million / 3-bedroom – AED 4.483 million).

Moving forward, the volume of commercial license issuances noted by TASWEEK will drive demand for offices, with excess supply already being observed. The resulting projected 3 per cent increase in office space prices will most probably lead to between 5 and 7 per cent increases in the next quarter.

The most affordable spaces based on average commercial price per square meter are in Dubai Investment Park (AED 5,742 buy / AED 697 rent); Dubai Silicon Oasis (AED 7,889 buy / AED 589 rent); Jumeirah Lake Towers (AED 12,305 buy / AED 803 rent); Tecom (AED 12,808 buy / AED 1,070 rent); and Sheikh Zayed Road (AED 17,655 buy / AED 1,115 rent).

Conclusion

“After the MIPIM real estate expo in France a few weeks ago, changes in investors’ reactions were noticed in response to an uneven global economic recovery which has affected real estate investment. A slow rise in real estate prices has influenced investors to look towards other alternatives that focus on either higher investment yield or capital growth. Real estate drivers mainly focused on job creation and income increases amidst mortgage interest decreases and capital growth. A ‘Wait and See’ sentiment currently prevails across the UAE, as a relatively stable market could witness rallies as trends such as ‘smart homes’ and lower price points gain traction. TASWEEK still believes that the positive momentum from Q4 2014 will result in another strong performance for UAE real estate in 2015,” concluded Al Awar.  

Posted by : GoDubai PR Dept, -
Viewed 14085 times
PR Category : Real Estate & Retail
Posted on : Sunday, March 29, 2015  3:42:00 PM UAE local time (GMT+4)
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