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Not so hot property
Faced with an oversupply of units and a severe lack of demand, the UAE real estate industry needs to become more transparent in order to boost investor confidence, say analysts.
February 15, 2010 4:29 by Aarti Nagraj
The real estate sector in the UAE is unlikely to witness growth in 2010, and at best, a “selective” portion of the market will stabilize this year, according to property consultants Jones Lang LaSalle. While some areas in the country may see property prices increasing or decreasing by around 5 percent, other areas could see price falls of between 15 and 20 percent, the company said.
Releasing its ‘top 10 trends’ for the year, Jones Lang LaSalle said there will be some significant changes in the property industry this year. These changes include: a shift from creating new developments to managing the existing ones; power changing hands from landlords to tenants; creation of homes for the medium income group rather the tiny luxury sector; and a new financing model for the sector.
The firm also said that the property industry has to move towards transparency and building the confidence of investors, as these issues are no longer an option, but a necessity.
“Lack of transparency and trust are major issues facing the UAE real estate industry,” the firm’s report said. “They have negatively impacted the UAE market and have eroded investor confidence. Effective regulation and greater transparency are some of the major challenges in 2010 and the years ahead,” it said.
But despite the measures it takes, the UAE, especially Dubai, will face an oversupply of homes this year. A critical element to the eventual recovery of the market is to increase demand.
Andrew J Charlesworth, the head of Capital Corporate Finance Advisory at Jones Lang LaSalle, tells Kipp that the real estate industry’s key target market are people “who retire here, live here, holiday here, have a second home here or set up a business here.” But it remains to be seen whether the government will formulate policy to attract such people to invest, warns Charlesworth.
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