The UAE real estate market has registered robust growth in the third quarter, thanks to the rapid population growth, the government’s globalization policies and improving income levels, said a report.  

The dramatic increase in the country's population is one of the key elements driving the local real estate market. stated Tasweek Real Estate Development and Marketing in its report.

This has prompted the UAE government to ramp up its infrastructure activities especially after Dubai’s successful bid to host World Expo 2020, it stated.

This year, the government is about to award infrastructure projects worth $15.18 billion, almost five times more than the value of contracts given last year.

Large amounts, for instance, were allocated for large-scale railway projects such as the Etihad Rail ($11 billion) and Abu Dhabi’s metro project ($8 billion). Dubai’s Road and Transport Authority also announced plans to spend $2 billion on the development and expansion of its metro and tram facilities, it added.

According to Tasweek, a number of new property development projects are being launched as the UAE’s population continues to increase at approximately 7.6 per cent per annum - one of the world’s highest population growth rates.

The population is projected to hit 9.9 million by the end of 2014 and 18.83 million by 2023, said the Abu Dhabi-based company.

"There was a fluctuating yet sustained demand for real estate in the third quarter as the size of the population expanded exponentially. This trend is only natural as the sector strives to meet the needs of the people," explained its CEO Masood Al Awar.

"The other indicators include stronger banking liquidity, more services, and either sustained or increased prices for off-plan rentals and sales. Further bolstering the industry’s expansion is the UAE government’s move to put significant measures in place to prevent any speculative activity in real estate and to control credit growth," he noted.

In the coming years, Tasweek expects the local industry to continue its uptrend not just due to the rising population and the sector’s steady recovery but also due to other fundamental factors such as surging investor confidence, Dubai’s vastly improved financial status, and joint public and private projects buoyed by the emirate’s hosting of World Expo 2020, added Al Awar.

Tasweek's report shows that the overall inflation rate remained at less than two per cent year-on-year in March although it continued to go up mainly due to rising rents.

On Abu Dhabi, Tasweek said the rents in the UAE capital have stabilised following the surge in the first and second quarters.

Prices are expected to come down, taking into consideration the huge gap between demand and supply as well as the purchasing power of residents.

Some landlords, however, have shrugged off lower occupancy rates in order to protect the current rental levels, but a decreased number of transactions indicate the market’s patience and confidence in the future.

In fact, the capital city’s real estate market experienced its sixth consecutive quarterly increase in the second quarter. One factor that affected the growth was Abu Dhabi government’s move to remove the rental cap, said the property expert.

On average, sales prices in the third quarter remained the same compared to the previous one - an indication of strong investor confidence in off-plan sales, it added.

According to Tasweek, Abu Dhabi’s property sector remains vibrant, with 20 new real estate projects now under way.

To be built over a period of three to five years, most of the new projects are being launched within or as an extension of the existing masterplanned communities with developed infrastructure and convenient facility access. This keeps the overall development costs low.

Like Abu Dhabi, rents in Dubai too have stabilised after the drastic jump in prices during the fourth quarter of 2013 to the second quarter this year.

However, Tasweek said it does not expect the prices to dramatically come down despite the projected increase in supply. In fact, it is expecting a five per cent increase in rentals in posh places such as Palm Jumeirah, Jumeirah Beach Residence, the Downtown area, and Dubai Marina.

As for real estate transactions, there was a general slowdown mainly due to the Dubai Government’s measures to cool down the market, such as doubling Real Estate Regulatory Authority (Rera) transfer fees and stabilizing rental prices. Transaction volumes have decreased by 15 per cent since the first quarter, the expert noted.
 
Dubai also witnessed an increased demand for residential units in the second quarter as average sale prices rose 35.5 per cent on a year-on-year basis.

The growing demand from home buyers and investors resulted in a slew of new project announcements, raising concerns of supply outstripping demand. Tasweek also noticed high interest among buyers in Dubai’s off-plan property options, it added.-TradeArabia News Service