The future builds on the foundation of the past. Well, the same has been demonstrated in 2015 and would be chronic in upcoming years, as certain regulations which were restructured in the past by the regulators have started coming into effect.
However, the fundamentals remain strong with the healthy market correction and this balanced growth will continue in 2016 since the real estate will remain an attractive investment option for investors and the end user.
The year 2015 had been an implausible year which anticipated a much-needed market correction, and all these sets the property market up, as it gradually prepares for a stronger and healthier 2016. Based on the recent report by a leading market research company, the return yields in Dubai real estate are relatively high around 7 per cent in comparison with the other global metropolitan cities.
Hence, properties in Dubai endow good alternatives for investors looking for high rental yields.
Flashback 2015
Due to positive investor’s sentiment, diversifications, strong economic regulations and promising demographics of the UAE’s economy, the property market upheld the healthy equilibrium, which safeguards it from any detrimental swing.
Considering the figures of numerous past reports it wisely indicates that the Dubai property sector is still ready for growth and expansion as it gears up for the country’s Expo 2020.
During the year 2015, we noticed that the continued stability in the property markets has maintained the market momentum as the investors see the opportunity to move their investment into different real estate segments including residential and commercial sectors across the emirates.
The increase in demand was vigorously seen in the emerging areas where the long-term returns assure strong rental yield and capital inflation for investors. Certainly this permanence in the property market brought optimistic impact on the mortgage sector as well, as many end users entered the market and sustained their purchasing with bank finance.
The investment figure revealed by the Dubai Land Department (DLD) indicates that one-quarter to the next the property mortgage transaction surpassed the cash deals in 2015.
DLD recorded 33,907 real estate transactions worth Dh186.34 billion from January to September 2015. In 2014, during the same period, 39,455 real estate transactions worth Dh155 billion were managed, which shows the decline of a 14 per cent in deals although the total worth investment figure was much higher in 2015.
In the review period, the cash transaction worth Dh78 billion were recorded while Dh94 billion came from mortgage deals and Dh14 billion were recorded from other transactions.
This shows that the mortgage accounted for 50 per cent of the total deals while cash made up 42 per cent only. If we recollect the Dubai Land Department data of 2014, which published that the cash deals had outshone mortgages, in which cash sales took up 51 per cent of the total transaction while mortgages accounted for 44 per cent, confirms that 2015 was a superior year for the mortgage industry.
There were numerous aspects that influenced the constant growth of the UAE real estate and mortgage market, which were initiated by the regulatory authorities in 2013, to support the long term stable market growth. One of the major factors was the hike in property registration fee from 2 per cent to 4 per cent by the Dubai Land Department which reduces many speculative activities.
Likewise, strict measures were undertaken by the Central Bank of UAE which requires the minimum cash reserve of 25-35 per cent to shell out for the down payment. However, historic low recorded interest rate and dropped sale price are enticing the property investors and the end users to consider buying a property in UAE that leverage the capital appreciation in the long-term.
In 2015, we even witnessed the property price adjustment by 15-20 per cent and the market graduated from investors to end-users and become a buyer’s market.
Currently ready properties are mainly purchased by the end user as they are more apprehensive about the market trends, whereas cash investors shifted to off-plan properties, where they require minimum immediate funding, as they are holding their cash and considering being in the market to make a quick return on their investment.
Position 2016
Dubai real estate market is gearing up to be one of the structured markets in the world due to the regulators strategic implementation of new realty rules.
Definitely, 2016 will see a sustainable appetite in the property market as we strongly believe investors will continue making sound investments that will provide value and attractive yields in long-term. For mortgage industry, it will likely to continue to be a good year as well, with the innovative mortgage products for end-users and investors along with the comprehensive financing option.
However, we foresee, before the end of 2016, the property market will start picking up the momentum for the Expo 2020
By Mr. Dhiren Gupta, Managing Director 4C Mortgage Consultancy
As published in Gulf Property January 2016 Edition