UAE real estate has potential to attract up to $450b investments
The UAE looks set to become a global economic centre of gravity in post-Covid era because of its successful strategy to handle the pandemic and quick rolling out of vaccination drive and it has a potential to attract up to $450 billion investments in real estate sector, according to experts at the Cityscape Summit.
Sultan Butti bin Mejren, director-general of Dubai Land Department, on Sunday inaugurated the latest edition of the summit at Expo 2020 site where government, industry and thought leaders descended to take part in a number of topics defining the current and future real estate landscape from across the region and beyond.
Ian Goldin, Professor of Globalisation and Development at University of Oxford, shared his thoughts about the future of the world economy and the implications for Dubai and its property sector. Identifying the Urban 2040 Plan and recent amendments to property and visa laws, Goldin believes there are very few places on earth that have achieved what the UAE has in the last 60 years.
He said the world economy will look very different than it does today by the year 2040. China will be the largest economy by far probably accounting for about 18 per cent of global economic activity, the US will have slipped from number one to number three, India will be bigger than the US at number at around 15 per cent and Indonesia will be close behind the US, with about 10 per cent of global economic activity.
“The centre of global economic gravity is shifting fast, and the pandemic like with so many other things has accelerated this shift towards this region and further east. In that, the UAE is ideally placed to be a bridge and a centre. Not only is it where things are happening and changing, but the composition of economic activity and markets are aligning perfectly, as well,” said Goldin.
He identified some of the UAE’s key industries these ‘composition growth sectors’;“Manufacturing, services, digital, financial, hospitality, retirement, care, health and education are all accounting for a greater share of our economies. Again, this places the UAE and Dubai in an ideal situation because these are where the country is excelling.”
“More people will come here to enjoy and work in these industries, with dramatic implications for property and the real estate sector. We are already seeing a rebound to the sorts of levels seen before the pandemic, and this will be sustained,” he added.
Fivefold investment in realty
Ian Albert, CEO Colliers for Mena region, discussed the staggering increase in real estate investment and how as an asset class, rental collection rates make it a keen focus for institutional investors and funds. He said there is a shift in the global investment market from the traditional shopping malls, offices and industrial parks.
“The investment from funds and institutions into the real estate market as increased fivefold since 2008. In the last five years alone, residential investment has grown 30 per cent in Europe from funds. This year, a full 25 per cent of committed investment fund money has gone in to residential,” he said.
He said the UAE real estate market has a potential to attract $350-450 billion worth of investment.“If you look at returns in Dubai, capital growth is sitting at about 30 per cent with yields at around five per cent, clearly outperforming some of the key markets in Europe,” he said.
Dh33.9 billion commercial transactions in Q3
The latest Dubai Commercial Property Price Indices, jointly created by JLL and Dubai Land Department, was launched at the Cityscape Global Summit.
According to the report, around 2,845 commercial property transactions worth Dh33.9 billion were recorded by the Dubai Land Department (DLD) during the third quarter of 2021. Transaction volumes were up one perc ent when compared with the preceding quarter and stood 34 per cent higher year-on-year.
“These figures demonstrate that 2021 saw a significant pick-up in sales activity in this sector when compared with last year. Sale transactions, which represent cash bought commercial properties, accounted for the largest proportion of the overall volume of transactions registered in the third quarter of 2021. Indeed, this element accounted for 74 per cent of the total figure, followed by mortgages at 18 per cent and gifts at two per cent,” the report said.
Meanwhile, the value of mortgage transactions equated to Dh20.3 billion during the third quarter of 2021 – double that of cash transactions. This means that the relatively small volume of sales completed using mortgage finance were high-value commercial property transactions which have high dependency on financing options.
Ready (existing) properties accounted for 86 per cent of transaction volumes in July-September 2021 quarter with off plan sales comprised the remaining 14 per cent.
“In terms of value, ready properties represented the vast majority (98 per cent) of total transactions recorded between July and September of this year. This suggests that buyers showed a strong preference for completed, and thus ready-to-occupy, commercial properties in Dubai,” said Khalwar Khan, head of Research, MEA and Turkey, JLL.
Around 88 per cent of the total volume of transactions in the third quarter of 2021 comprised properties located in freehold areas. Business Bay took the lead, recording 367 transactions, and was followed by Jebal Ali First (279 transactions) and Al Thanyah Fifth (209 transactions). In terms of value, freehold areas represented 68 per cent of total transactions. Marsa Dubai was the most popular area in this context, recording transactions worth Dh4.9 billion. Palm Jumeirah took second place at Dh3 billion and Al Kheeran ranked third at Dh2 billion.
A glimpse into the future and Dubai’s Vision 2040
Nasser Abu Shehab, CEO, Strategy and Corporate Governance, Dubai RTA, elaborated how Dubai’s Vision 2040 will shape real estate and future investment.
“The Dubai Urban master plan is focused on the development and investment in to five main urban centres, three existing and two new. This will support growth of the economic sector and increase job opportunities across the city.
“Two of the new areas are Expo 2020 and Dubai Silicon Oasis, both new and important areas for tourism, research and events,” he said.
He said the 2040 Urban Plan also proposed over 120 strategic projects and initiatives through direct government investments or private sector partnerships and attracting foreign direct investment.“These are specifically designed to forge a new and advanced economic sector and well as supporting vital sectors such as tourism and logistics,” said Abu Shehab.