UAE Residential Markets Further Stabilizing in 2014

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According to Cluttons' annual 2014 UAE Property Report, the UAE's residential property market has experienced improved stability during the first six months of 2014, with the rate of expansion steadying. This has led to the pace of growth in residential rents and values slowing in Abu Dhabi, Dubai and Sharjah.
 
Backed by a robust economy and a stable real estate sector, the outlook for the UAE remains extremely positive for the remainder of 2014.

UAE Residential Market Highlights:

• Residential values in Dubai rise by 3.8% in H1
• 19% growth in Abu Dhabi residential capital values over the same period
• Sharjah rents up by 17%; Al Nahda is city's top performer

 
Cluttons' data reveals that Abu Dhabi's freehold market recorded a 11.4% rise in capital values in Q2, leaving them 48% above the same time last year. The latest rise translates into a 19% increase in average house prices during the first six months of the year, with the removal of the rent cap helping in part to fuel buyer demand. In the rental market, Cluttons expects affordability to remain central to the rental value growth equation, with rises likely to slow further in the coming months.
 
In Dubai, house prices have increased by 0.6% during the second quarter of this year, with villa prices declining by 1.6% and apartment values increasing by 2.3%. This takes price growth for the first six months of the year to 3.8% and reflects the widespread stabilisation of the market. The lettings market has continued to eke out marginal growth, with the city's freehold areas recording a 1.4% rise during Q2, taking total growth during H1 to just under 3%. In real terms, the rental value growth has been relatively flat, after inflation (2.7%), over the same period is factored in. Despite this, average rents remain 8.4% ahead of Q2 2013.
 
Affordable rents in Sharjah continue to entice Dubai-based employees back to the emirate, while a limited supply pipeline has helped to drive up rents during the second quarter by 5.7%, following the 10.8% rise recorded in Q1. In addition, Cluttons notes a rise in the number of businesses from Dubai seeking out bulk staff housing in the emirate. With rental demand remaining high for villas, and supply levels remaining low, rents continue to edge upwards. At the Al Barashi Villa Compound for instance, Cluttons has recorded a consistently high level of enquiries, with average rents for a three-bedroom detached villa, standing at AED 110,000 per annum.
 
Steve Morgan, Chief Executive at Cluttons Middle East commented, "The UAE's economy has continued to mature and evolve, with the IMF predicting 4.4% annual growth this year. We see this as an indication of further sustainable growth driven by resilient core sectors, which continue to expand on the back of robust, widespread rises in business activity."
 
"The real estate market has been a powerful driver behind the strong economic growth and although residential values and rents in Abu Dhabi, Dubai and Sharjah are showing signs of stabilizing, we expect other segments of the economy to compensate for the slower growth rates in the real estate market. It is important to note that although values and rents may be stabilizing to an extent, they are still maintaining a positive growth trajectory and we expect this to persist, which will in turn deliver the sustainability we have been anticipating. The careful implementation of measures at a federal and emirate level have been exceptionally successful in transforming the residential markets; this is particularly true in Dubai, where growth is now tracking a much more sustainable course as the market matures further."