Real estate transactions in Dubai are moving ahead of what the city achieved in 2018, when Dh223 billion was generated from 53,000 registrations.

For the first five months of this year, Dh106 billion worth of deals were done, compared with Dh95 billion same period last year, Dubai Land Department (DLD) data shows.

Last year, UAE nationals and Indian buyers together accounted for Dh18 billion of the transactions.

But especially heartening for the real estate sector’s future prospects is the fact that new investors represented 66 per cent of the buyer activity during this period.

In value terms, they contributed 57 per cent of the transactions.

Top location pick

Business Bay took the honours in both volume and value terms, accounting for 4,000 plus transactions and together adding Dh11 billion into the market during 2018.

Challenges vs opportunities

In the first five months of this year, 48 new projects were launched, which would add around 8,000 new residential units.

According to Sultan Butti Bin Mejren, Director-General of the Land Department: “Though the real estate sector reflects the development achieved by the emirate across all fields, it does not come without challenges. On the one hand, we have to continue this momentum; on the other, we should ensure transparent communication to all investors and other parties in this sector.”

Cutting down supply

The Land Department data also show new launch activity as declining, which would give the real estate authorities, developers and investors some breathing space for demand and supply levels to be reset.

Last year, projects under construction in the freehold areas were “only” 102, as per project registration date. The number of units expected to be added from these would be about 130,000.

As for completed residential units in freehold areas only and registered, the tally reached 7,469 units, excluding villas and villa complexes.

“If there is a firm handle by the government and developers on supply in the next three years, it can offset much of the concerns on price movements,” said Samir Ahmad Munshi, Managing Director at Silver Heights.

“Because right now, it’s easier to buy a ready property cheaper than its ‘replacement value’, which is what it would cost to build a new unit including cost of land. For instance, at Silicon Oasis, a one bedroom can be picked up for Dh400,000 — to build a new one, it would take Dh500,000 and even above.”

Rentals

Also released was data on leasing activity in Dubai, totalling 246,509 new contracts during 2018. The same period also saw 251,409 units getting their contracts renewed.

“From 2013-16, new lease contracts were decreasing steadily against an increase in renewed lease contracts, whereas from 2017 until 2018, the numbers of both new and renewed lease contracts increased,” the Land Department notes. “However, the growth rate of new lease contracts was higher than that of renewed lease contracts, which reflects the additional demand on residential and non-residential units with the correction in rents.”

This will be of vital importance to landlords as more units are completed and ready to take in their first occupants. If the pace in new leasing activity is maintained, it would mean a good number of new properties stand a good chance of finding tenants.

Land Department’s remit

Going forward, all rental contracts in the emirate will come under the purview of the Land Department. Until now, the Ejari contracts and all data within them were overseen by Rera (Real Estate Regulatory Authority).

The new law now empowers Rera with overseeing wider trends in the property market, including the all-too crucial one related to demand and supply. (It will continue to work closely with developers on projects and in the active management of escrow accounts associated with them.)

This is the first major update to Rera’s operational role since 2007. According to Sachin Kerur, Managing Partner at the law firm of Reed Smith: “In many ways this is the ideal time to implement such changes. The market remains somewhat soft — so any regulatory changes which better define the rights of developers and investors and provide a more bankable environment for projects, must be welcomed.

“Much has changed since 2007 and it is no surprise that 12 years later, this act of restructuring of Rera has been put forward. Any regulator must aim to bring order, accountability, stability and, of course, transparency to markets that they oversee.” (Rera will also be having a new CEO shortly, to be confirmed by the Chairman of The Executive Council.)

Published in Gulf News: September 17, 2019