UAE real estate sector performance subdued in Q1

“With a marked slowdown in 2018, the government has been swift in introducing measures including increased spending, new regulations and revised policies to raise investor sentiment,” said Manika Dhama, the head of strategic consulting and research at Cavendish Maxwell.

“However, with more supply expected to be added throughout 2019 – and we have already seen a substantial number of units handed over in Q1 – we expect prices and rents for residential units to continue to decline amid soft demand,” she added.

Flight-to-quality

While demand for certain commercial and industrial properties slightly improved over the quarter, the report said an overall trend of flight-to-quality and more affordable rents.

“The market was still challenging in Q1 2019, with the gap in the local two-tier segment widening as occupiers continue to seek better value,” said Andrew Love, partner and head of investment and commercial agency at Cavendish Maxwell.

“We have noticed an uptick in demand in free zone areas, especially in Dubai and Abu Dhabi, and some sub-categories have outperformed general market estimates.”

“With landlords offering flexible lease terms and economic incentives, and as strategic areas like Dubai South grow, demand is expected to increase,” he added.

Stable

According to the report, the prices of villas and townhouses in Dubai remained stable at an average of AED 1.8 million, with apartments priced at an average of AED 1.2 million.

Over the same period, prices for apartments fell by 9.6 percent and 10 percent for villas and townhouses in Abu Dhabi’s major investment zones.

The report also noted that subdued consumer spending impacted the retail and officer sectors across the country, with vacancy levels in malls increasing and new supply expected to put downward pressure on rents.