Monday, May 21, 2012

UAE Real estate market showing signs of stabilization IMF Staff Report for UAE - 2012



Following the large decline in real estate prices since 2008, some segments of the real estate market have begun showing signs of stabilization. By the end of 2011, in Dubai the hotel and retail segments and some parts of the residential market started to pick up, whereas office rents have continued to decline. In Abu Dhabi, where the initial real estate drop was less pronounced, both commercial and residential rents have continued to decline. The ongoing large oversupply and upcoming project completions continue to weigh on the sector.
In Dubai, the office vacancy rate (30 percent at end-2011) is expected to increase further as large additional supply will come on stream this year. Retail and hotel vacancy rates (20 and 25 percent at end-2011, respectively) could stabilize as fewer new projects are in the pipeline and demand continues to be substantial.
 In Abu Dhabi, the real estate supply and demand gap continues to widen. The office market vacancy rate (23 percent at end 2011) is expected to grow in light of the expected large new supply. Many projects in the residential market are also expected to come on stream. In the hotel segment, vacancies remain high at 35 percent. The authorities have taken steps to help the real estate sector. In Dubai, 220 projects in early stages have been canceled, and the Dubai Land Department has introduced initiatives to support projects that are close to completion, by certifying viable projects to facilitate financing. The Abu Dhabi government has reviewed the project pipeline of Abu Dhabi GREs, which are now proceeding at a reduced pace. In addition, Aldar, one of the largest developers, has received support from the Abu Dhabi government and has progressed with its restructuring plans to adjust to market conditions. On the federal level, legal amendments are under discussion that would relax foreign ownership restrictions, which could help boost demand.