The UAE property market is set to sustain its performance after peaking in 2014, with operating conditions likely to temper performance, a report said.

The property sector’s performance in the second half (H2) of the year exceeded expectations, with industry-wide economic diversification seen as the key driver to sustained growth, highlighted the latest market intelligence report from Dubai-based Tasweek Real Estate Development.

Based on the results for the second quarter (Q2) of the year, Tasweek forecasts a moderate five to 10 per cent correction in the UAE’s residential real estate prices after 18 months of sharp appreciation.

Abu Dhabi rents are expected to maintain growth, while Dubai is expected to challenge and eventually overcome price fluctuations. Meanwhile, both markets experienced price corrections specifically for freehold units in Q2.

The report added that economic diversification of real estate, favourable demographics and protective regulatory measures should be able to effectively insulate the local market from any major crisis. Retail and commercial spaces are foreseen to be more resilient than hospitality given the sizable supply of hotel rooms expected in anticipation of Dubai Expo 2020.

Masood Al Awar, CEO, Tasweek Real Estate Development and Marketing, said: “As we foresaw in the past quarter, the primary markets of Dubai and Abu Dhabi underwent price corrections in Q2 2015 that will most probably result in moderate upward market movements throughout the rest of the year.”

“With global oil prices sharply declining since mid-2014, real estate economic diversification has taken centrestage as the driver of growth in the UAE and across the region, which will have a positive spillover effect on the real estate business. Given the recent market shifts, the next half of 2015 will be an important indicator of how our industry will fare in the short to medium term as the UAE gears up for Expo 2020,” he added.

Abu Dhabi

Tasweek’s Q2 market research showed that Abu Dhabi’s residential market sustained the Q1 trend of landlords protecting rental levels by reducing supply. Demand softened in Q2, though, with the stable prices reflecting no changes over Q1. Overall, rental prices were flat in Abu Dhabi island and in the outlying freehold areas.

As for the office segment, the Tasweek study indicated a lingering weakness attributed to excess supply and less demand. New business licenses issued in Abu Dhabi in fact decreased by five per cent from 1,760 in January and February of 2014 to only 1,700 in 2015 so far.

 Average rental prices for high-end spaces dropped from Dh2,500 ($680) per sq ft last year to Dh2,200, while medium-quality offices also went down from Dh1,500 in 2014 to Dh1,300.

Dubai

Residential rates have been falling in Dubai due to weak demand for luxury properties, sliding oil prices and a stronger US dollar, according to the Tasweek report. On average, sales prices in the emirate decreased by between five and 10 per cent compared to 2014. Average rents for studio and one-bedroom units fell three per cent, although two- and three-bedroom rates rose from five to 10 per cent.

Dubai’s office business for Q2 2015 saw a five per cent increase in prices in line with Tasweek’s projections from its last market research. The number of new commercial licences issued was at the same level from the previous quarter, thus increasing demand for office space.

“Tasweek strongly stands by its earlier forecast of a robust 2015 UAE property market based on the combined results of our research in the first half. The high level of diversification, population growth, consumer confidence and regulatory support we have been observing over the past months reinforces our belief in sustained local market growth for this year and in the medium term,” concluded Al Awar. – TradeArabia News Service