Notables & Trends
Changes in property ownership laws and regulations have made a strong impact on the market in the last year and project cancellations and delays have become commonplace. However, there have also been notable improvements to the real estate offering with public transportation networks being established in the region. The shift in the market has given rise to a number of key trends – affordable housing, greater flexibility in buying and leasing options, a change in the way properties are sold and a number of residents and investors alike using the downturn as an opportunity to trade-up.
2009 Notables
Transportation Networks
Dubai Metro began operations in 2009. The project will serve as a litmus test for other GCC governments interested in developing domestic and regional transportation infrastructure. Despite the economic downturn, Nakheel launched its Palm Jumeirah Monorail this year, and others in the region (such as Masdar) appear committed to providing internal transportation networks that link to the greater public transportation grid.
Regulatory Authorities
Following the launch of RERA (Real Estate Regulatory Authority) in 2008, ARERE (Ajman Real Estate Regulatory Establishment) was launched in January 2009. Various regional governments, including Saudi Arabia, have announced plans for establishing similar entities to provide greater transparency and stability.
Project Cancellations And Delays
The increase in the number of project delays and cancellations has further dented investor confidence. Conflicts between investors and developers, master developers and third-party developers, and tenants and landlords are becoming increasingly common as a result.
Changes To The UAE Freehold Property Ownership Laws
The UAE government issued a federal law to clarify the issuance of visas to foreign nationals owning freehold property in the UAE. The multiple-entry, six-month visa for those whose properties are worth over AED 1 million and who have a monthly income of no less than AED 10,000 has had a lukewarm reception. It continues the trend of new regulations affecting investors’ assessment of the market.
2009 Trends
Affordable Housing
Perhaps in reaction to the oversaturation of luxury products, developers are starting to cater to the middle to lower-income brackets. Governments (Bahrain, Saudi Arabia) as well as developers and financial institutions (Aldar, Saudi Binladin, Kinan, Islamic Development Bank) have all announced products to serve a previously neglected market segment.
Flexible Leasing Agreements And Buying Options
Indicative of the shift in the dynamics of supply and demand, landlords are now offering and accepting multiple cheques for annual leasing agreements, in contrast to the previous practice of taking single cheques. Additionally, alternative payment options such as “rent to own” programs have become more commonplace as developers try to spur the market.
Trading Up
Falling prices have empowered various segments of the rental market to move into bigger or better properties at the same or lower cost as their previous tenancy. This has led to some noticeable shifts in the demographics and concentration of different neighborhoods. This trend is also affecting the commercial real estate market, albeit at a slower pace.
Failure Of Auctions
Once an attractive way to achieve record-high prices, two property auctions held in Dubai during 2009 have been largely considered failures, with many of the available plots failing to meet the reserve prices.
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