Having bravely negotiated a rather tough 2016, the UAE real estate sector, spearheaded by its two major markets Dubai and Abu Dhabi, appears well geared to make positive strides this year, said a report.

Despite the effects of global events such as Brexit, the US presidential elections and a continued liquidity crunch owing to low oil prices resonating across markets worldwide, the diversity of the UAE economy helped the country sustain these headwinds and players in its various business sectors, including real estate, continued with mega projects, according to UAE property portal Bayut.

Projects such as Dubai South, Jumeirah Central and Dubai Creek Harbour showcase the faith developers continue to place in the real estate sector, which in turn inspires confidence in domestic and international investors, it stated.

Across 2016, average apartment prices in Dubai were down 11 per cent to Dh2.29 million ($623,295) from the 2015 average of Dh2.57 million, and rents faced a similar downward trend, dropping six per cent from the 2015 average.

Rents were down six per cent on average in Abu Dhabi as well, but unit prices stayed stable overall, coming down by just 1 per cent on average across the year, said the report.

There remained some pressure on apartment rents in Dubai as new stock was made available in several areas across the emirate. Moreover, an exodus to the suburbs also had an effect on rents in the main parts of the emirate, it stated

According to Bayut, on an average, studio units faced a rental price drop of eight per cent in 2016, coming down to Dh57,000 from the 2015 average of Dh62,000.

The average price for studios also dropped by five per cent to Dh0.77 million, but the average rental yield for unit owners remained attractive at 7.4 per cent. One-bed units faced a similar trend with the average price coming down by 10 per cent and average rent falling 5 per cent to Dh96,000 over the course of 2016.

The average yield for one-bed units in 2016 was seven per cent, it stated.

On the Dubai apartment scenario, Bayut said the average rent for two-bed units dropped eight per cent to the Dh145,000 mark, and the average price for two-bed units was down 11 per cent to Dh2.5 million. Rental yield for the category topped out at 6 per cent in 2016.

On average, three-bed and four-bed units saw rental price drops of six and eight per cent respectively in 2016, landing at the Dh202,000 and 305,000 marks.

The average prices for these categories also came down by 11 per cent and 15 per cent over the course of 2016, with respective yields recorded at 5.4 per cent and 3.5 per cent, it stated.

The top localities for both renting and buying of apartments in Dubai were Dubai Marina, Jumeirah Lakes Towers (JLT) and Downtown Dubai. While Bur Dubai and Dubai Silicon Oasis were a hot favourite among the tenants for their rents, Palm Jumeirah and Dubai Sports City were the hotspots for buying apartments.

The 2016 closing saw authorities in the emirate reintroducing the five-per cent rental increase cap for the residential sector, despite rents falling by an average of six per cent over the course of the year, said Bayut.

The move was aimed at protecting tenants from arbitrary rental hikes by owners that did not align with market norms, a move welcomed far and wide, it stated.

On Abu Dhabi market, Bayut said in terms of rental prices, it had noticed a fall in values across all categories, with studio unit rents dropping the most during 2016, losing eight per cent of value.

The average rent for these units came down to Dh58,000 from the 2015 average of Dh63,000. However, unit owners still earned an average yield of 8 per cent as average unit prices also fell by 1 per cent to Dh0.72 million.

In the one-bed category, unit prices were down two per cent in 2016 on average, while average rents came down by six per cent to Dh92,000. The yield for the popular category was recorded at 7.2 per cent.

The rental average for two-bed units was down five per cent, landing at the Dh132,000 mark, with the average price for units remaining at Dh1.86 million in 2016. According to Bayut statistics, the average two-bed unit returned a rental yield of 7.1 per cent.

Larger units with three bedrooms cost Dh2.71 million on average in the outgoing year, matching the 2015 average for the category, but rents fell by six per cent to Dh175,000 on average and the yield topped out at 6.5 per cent.

The largest apartment category, the four-bed units, commanded an average rent of Dh240,000, down seven per cent from the previous year’s average of Dh257,000. The average price was close to the Dh4.65 million mark, while unit owners earned an average rental yield of 5.2 per cent in 2016.

The top localities for renting of apartments in 2016 were Al Reem Island; Al Raha Beach; Khalifa City A; Corniche Area and Al Muroor, while for buying residential units, the best hotspots were Al Reem Island; Al Raha Beach;  Al Reef; Saadiyat Island and Al Ghadeer.

On the 2017 outlook, Bayut said with prices having levelled out and rents rationalising, the real estate markets in the two main emirates appear closer to maturity than ever, where inflationary and haphazard overnight gains are quickly becoming a thing of the past.

The overall UAE market is much more suitable for long-term indulgence, one where attractive rental returns and natural capital value gains keep the stakeholders engaged.

For tenants, there could be no better time to seriously consider becoming a property owner. With reduced rental costs, there is generally more going towards savings now, and affordable prices coupled with the easy payment plans on offer have made the transition from tenancy to ownership much easier, said the Emirati property portal.

With a topsy-turvy 2016 in the rear-view mirror, this year is likely to be the one when preparations for the Expo 2020 gain full momentum and when the engines of job growth, infrastructure development and economic prosperity are set to rev at full speed, it added.-TradeArabia News Service