Top five residential real estate trends

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Top five residential real estate trends

From affordability, to developer partnerships and the rise of new investment vehicles, we examine the top trends transforming Dubai’s property market

Trend One: Affordability

Dubai’s property market has long been synonymous with luxury living but a growing young and middle-class population is beginning to drive change in the city’s real estate model. More than 80 per cent of housing transactions in Dubai last year were below AED2m and almost half were below AED1m, according to the Affordable Housing Institute. The vast majority of properties sold were apartments, indicating a swing towards more budget-friendly living. Priced out of Dubai’s super-prime market, these low and middle-income residents represent a fresh commercial opportunity for the emirate’s developers, and a pipeline of affordable housing is emerging in response.

“In 2015, 40 per cent of households in Dubai had a purchasing budget of AED780,000, or could rent a unit costing AED73,000,” says Craig Plumb, head of research at real estate consultancy JLL MENA. “At the time, only 20 per cent of new homes being delivered in Dubai met those price points. Since then, developers have shifted their attention to the more affordable sector of the market.”
Among the largest schemes unveiled this year is Aldar’s AED10bn Alghadeer development, a 3 million square metre community delivering 611 homes in its first phase. Other affordable housing projects are also in play in Jumeirah Beach Residence, Dubai South and Dubailand, each aiming to attract first-time buyers with smaller, attractively priced apartments. This shift is a wider reflection of Dubai’s maturing property market, and is likely to continue, says Kara Patterson, global exhibition manager at Cityscape.
“Investors and home buyers are looking to make smart decisions. Over the next year, we will see more developers, agents and financial institutions try to meet those needs.”

Trend Two: Community-based living

In Dubai, the old adage of ‘location, location, location’ still holds true when it comes to the housing market. Despite the speed of the city’s development, its most established communities remain among the most popular, a reflection of their proximity to popular attractions, key transport routes and other important facilities. A citywide survey earlier this year found quality older developments including the Springs, the Greens and Jumeirah Lake Towers (JLT) were ranked highest by residents, when scored for factors such as lifestyle, connectivity and sense of community.
Amid the popularity of off-plan buying – more than 25,000 properties were snapped up in 2017, marking the highest rate of off-plan sales since 2008 – investments in older, prime developments continue to offer robust yields, say experts. For buyers looking to the long-term, these high-quality properties can be a defensive investment, says Ryan Kaspar, luxury rentals director at real estate brokerage, Luxhabitat.
“The demand for well positioned and well-maintained properties is stable, and we expect a higher demand in coming years,” he explains. “If you look further down the line, I think this sort of investment in a prime property becomes even more lucrative. If the buyer is prepared to sacrifice some short-term ROI and invest money into the property’s maintenance, this can be repaid in higher rents.”

Trend Three: Infrastructure boom

Expo 2020 is on the horizon and fuelling a new wave of infrastructure growth across Dubai, financed by the emirate’s biggest-ever annual budget of $15.4bn. More than $8bn has been allocated to fund transport and infrastructure around the Expo site, according to data from BNC Network, with expansion of the emirate’s air and metro links also underway to smooth access to and from the world fair.
For developers, this infrastructure boom is expanding the city’s limits, opening up access to plots previously on the outskirts of Dubai, but now served by key transport links. Dubai South, the masterplanned “aerotropolis” that spans Al Maktoum International Airport and the Expo 2020 site, is a case in point: the development is expected to house 1 million residents and some 500,000 jobs once complete.
This growth is likely not only to boost access to lower-cost housing, says Taimur Khan, research manager at Knight Frank, but also help to ensure Dubai’s property market keeps pace with a population forecast to reach 5 million by 2030.
“We’ve seen a lot of developers taking on projects in locations they wouldn’t previously have considered, and in more affordable locations,” says Khan. “Without that infrastructure development, we wouldn’t have seen the increased supply to the market. Next year alone, you can see anything from 70,000 to 100,000 new units being delivered, which is significant.”

Trend Four: The rise of REITs

Real Estate Investment Trusts are on the rise in the UAE, as investors look for fresh ways of gaining exposure to the country’s expanding property market. REITs, as they are more commonly known, act as property-based mutual funds: they allow collective ownership of a portfolio of real estate assets, which generates regular income. The perks include giving smaller investors a chance to gain access to the property market, other than as an owner, and the portfolio model acts as a buffer to the natural rise and fall of rental yields.
Dubai listed the region’s first REIT in 2014: the $400m Emirates Reit. Since then, Saudi Arabia, Oman, Abu Dhabi and Bahrain have followed its lead, updating their regulatory frameworks for the use and listing of funds in support of growing investor appetite.
While there have been relatively few property trusts listed in recent years, this trend is changing, says Plumb. The ENBD REIT, operated by Emirates NBD Asset Management, began trading on the Nasdaq Dubai in March last year: it’s current portfolio stands at $463m, representing 11 properties. Dubai Investments said in August that its subsidiary Al Mal Capital was gearing up to launch its mixed-use REIT on the Dubai bourse before the end of the year, with analysts suggesting it could be a valued option for investors eyeing Dubai.
“The growth of REIT’s is a welcome sign of the increased maturity of the UAE real estate market,” says Plumb. “REITs offer access to the real estate market for those investors who are deterred by the high ticket price and significant acquisition costs of purchasing residential units outright and those seeking to diversify their investment across a number of different locations.”

Trend Five: Developer collaboration

Dubai’s evolving property market is putting pressure on industry players to find new skills, leaner business models and new ways of collaborating outside traditional boundaries. As competition increases, companies are seeking new ways to trim costs and fast-track projects to completion.
One result has been the rise of cross-industry ventures that are driving activity in the real estate market, and offering perks to both developers and investors. In March, Abu Dhabi’s Aldar Properties and Dubai’s Emaar Properties – two of the countries biggest real estate companies – joined forces to develop AED30bn worth of local and international projects.
Emaar is also collaborating with Dubai Holding, the investment vehicle behind Dubai Properties, to build the luxury district Dubai Creek Harbour. When complete in 2020, the development will house the world’s tallest tower, another record for the city that is already home to the highest skyscraper – the Burj Khalifa.
Last year, company North 25 was launched to manage multibillion-dollar development projects across the portfolios of Dubai Holding and Meraas Holding, the brand behind Box Park and City Walk. “The market is maturing significantly. We are seeing a lot more competition so it’s not unusual to see companies and developers coming together to increase efficiencies and reduce cash burdens,” says Knight Frank’s Khan. “It’s a positive thing.”
In terms of market impact, Khan believes it will translate into an influx of large-scale developments, a view supported by Cityscape’s Patterson.
“These industry collaborations speak to a greater desire for developers and real estate professionals to work together, and provide vehicles to drive further investment into the country,” she says.

Topics

  • Real Estate
  • Dubai
  • Investment