The UAE is a vibrant and reasonably healthy city. In terms of trade and tourism, the UAE's world-class infrastructure has already established it as a major player and has drawn major foreign investors worldwide. So, if you've decided to embark on a UAE real estate business, you have to see the infinite amount of opportunity as an entrepreneur and just keep building.
As this emirate was one of the first to offer 100 per cent freehold land, there is a massive demand for property in the UAE. A land in Freehold is a property wholly owned by the owner and no one else. Therefore, the owner of such property will forever enjoy possession of the said land and can carry out any operation on his land. Such procedures should be following local laws and regulations. The 2004 Freehold Property Law was a significant reason behind the development of the UAE real estate market.
The government also regulates the real estate market’s laws and regulations and focuses on its growth. It is achieved by offering ways to secure transactions in real estate and position the escrow accounts in locations. An escrow account is an account in which the associated funds are kept secure when two or more parties complete a transaction with trusted third-party monitoring the transaction.
According to the latest research release, rising rent moderation, supply, and changing, demand for executive positions in the job sector is expected to continue and affect the residential market during 2018. That's why you can see many international residents who have bought residential flats in the UAE. Therefore, it could be an excellent opportunity for real estate developers to start a real estate company in the UAE.
Compared to its counterparts in other countries, the real estate sector in the United Arab Emirates has some specific attributes. It is mostly because, relative to natives, the UAE is a temporary home for many ex-pats, which affects their preferences and consideration when selecting a residential venue.
Despite being among so many driving forces for the economic growth of the UAE over the past two decades, long before Covid-19 arrived, the real estate industry had been fighting sluggish market conditions. But the pandemic, combined with the postponement of Expo 2020, has been a significant catalyst for the sector since its 2013 announcement and has added further instability, characterised by delayed projects, declining demand, and unfavourable climate-reflecting values and rental yields.
In the UAE, particularly in Dubai, the market was already in the late downturn stage of the cycle for all asset classes. Rents for the residential, office, retail and hospitality segments were bottoming out even before Covid-19. For the residential sector, in particular, we assumed that we were close to the bottom.
Supply vs Demand
The supply vs demand dilemma has been ever-present in the industry. The Higher Committee for Real Estate Planning aimed to find the right balance between offering only units of market requirements and thus retaining real estate prices and the build-it-and-they-will-come mentality that has defined Dubai's exponential growth since the 1990s.
The trigger has been that, since their revenues have plummeted, lower oil prices have forced governments to implement fiscal discipline. While these budgetary restrictions were appropriate, they impacted the pace of economic growth that had a knock-on effect on the sector’s demand.
The recent fall in rents and prices results from falling demand, despite more than 75,000 new units being completed in 2018 and 2019. It has been a problem with the order and not a problem with supply. The current crisis has impacted employment, leading inevitably to some people leaving the country, which will always reduce demand in a market with a high proportion of ex-pats.
Reduced Salaries and Furloughs
Weaker demand is not just a result of departures. Many firms have requested workers to pay cuts, unpaid leave or both as they seek to cope with the health crisis’s unprecedented effects. Industries such as hospitality, entertainment, events and travel and tourism were tough to hit, and affected workers, in turn, pursued concessions on their rent or a cheaper option at the end of a contract, all of which generated downward pressure on the market.
Lack of Immunity
As the world moves closer to a post-Covid era, in the local real estate market, a myriad of obstacles will persist until 2021. Due to the pandemic, the economic contraction will lead to a 'wait and watch' approach among buyers to a great extent. The strain on disposable income and investor sentiment is partly attributable. Developers and contractors are not immune to Covid-19's effects.
Besides supply chain instability, increased safety costs, and decreased productivity, any future project delays would further affect contractors’ execution costs. Developers will need to carefully treat their commitments, as vendors are now forced to enter into price renegotiations.
For those with adequate funding, each crisis provides an opportunity. There is no more clear example than real estate, where universal utility and appeal properties are nevertheless subject to market whims. As such, individuals who have considered buying in the UAE can see the current climate as offering a perfect storm of variables.
The tremendous demand for properties is in excellent condition and at a desirable and affordable price. Still, these properties are becoming few and far between, and some buyers are now willing to pay a little more to get the stuff they want.
Top 5 Trends UAE's Real Estate Sector in Post Covid 19 Era
It is now evident that the pandemic of Covid-19 has changed the way we live and work forever. The virus has affected our workplaces, our homes, our outdoor spaces, any location. The latest coronavirus pandemic has struck every sector of the economy, including the previously stable real estate sector. In the turbulent times of Covid-19, both positive and negative opinions are shared on how the pandemic will impact the real estate industry in the UAE. However, both types of forecasts have argued that modernity and inclusivity would be part of the sector’s current trend.
As new patterns emerge, in a post-COVID world, the realty market will not be the same. The demand and supply dynamics will grow and change. Due to the excess of supply, taking into account the following observations, particularly with the crisis, the entrepreneurs could help stand out from the competition:
1. Focus on Safety, Sanitation and Optimization
Abu Dhabi and Dubai have been named the top two most liveable cities in the Arab world, respectively. According to the new Global Liveability Index released last March 2020 by The Economist Intelligence Unit, this key trend will shore up the local real estate sector’s direction to fast-track recovery.
In terms of consumer demand, we are moving toward a new path that will zero in on the central concept of health and safety in the new standard’s face. In many sectors, especially in real estate, the UAE's top rank in the liveability index will pay off, helping us mount a strong comeback, this rebound will be developed as the safest nation in the world by the remarkable global feat of the UAE.
It will pave the way for expanding property designs in the next decade to automate protection and sanitation principles.
2. Preference for Lower-Density Properties
Most prospective developers, owners, and residents alike would opt for more livable spaces to adapt to the new standard, and there would be a strong demand for lower-density properties and locations. In high-density properties, the coronavirus pandemic has highlighted the greater operational danger of contagion. The higher the occupant density is, the greater the chance of infecting others. The industry is rethinking the layout of the room to maintain new distance criteria.
Also, optimisation of improved property standards, mixed-use projects, and digitalisation include other evolving real estate and property trends that will enjoy a share of new demand.
3. Boosting Property Standards
Since market tastes are expected to change to new standards, property developers can see the need to analyse construction specifications and have improved facilities, such as comprehensive retrofitting. Furthermore, by allocating additional spaces and contingent designs that solidify different facets of safety and bring more value to prospective developers and tenants, construction layouts will see a significant revamp.
In the new normal, to ensure protection against any viruses or diseases, people would always have the mentality to observe the physical distance. For many buyers, it serves as a guiding principle when selecting a land.
4. Mixed-Use Community Development
As individuals are now more concerned about health and safety requirements due to the pandemic, developments in mixed-use, or those that combine commercial, residential, and industrial activities into one location, will turn out to be one of the most sought-after properties in the new normal. An increased number of developers will develop residential projects closer to or include health and lifestyle centres, retail stores and supermarkets, and learning institutions.
The concept of a "community within a property" would be implemented by this form of development. More tenants are likely to refrain from moving excessively for a while to avoid crowded areas.
5. Digital Adoption
The idea of virtual reality was already gaining too much popularity even before the dawn of COVID-19, allowing prospective property buyers to explore the property without a physical visit. The COVID-19 pandemic has strengthened the need for alignment with the UAE's digital transformation vision for the private sector, including real estate. The industry is changing business experiences dramatically.
By embracing artificial intelligence and smart technology, developers can ensure that they are still within their customers’ scope with the aid of the customer relationship management (CRM) platform and enterprise resource planning (ERP) systems.
The real estate industry has been swift to embrace digital solutions, like all others. The crisis has unwittingly taught us that there are varied and cost-effective ways to pursue human activity. The planet has now reached a digital-irreversibility zone. The real estate industry will adapt and feel the effect of digitisation. Digitisation will dominate most of the processes, whether sales, capital deployment, property management, virtual tours, or even consumption habits.
Post-COVID-19, a revolution in how people think and live is going to occur. The attitude of the buyer would positively be affected. Employment instability decreased incomes, investments and company volumes have compromised cash flows to the real estate company. On the positive side, the real estate industry has reacted rapidly to changes and adapted to emerging technologies; this is evident in the digitisation of so many processes. The Covid-19 pandemic has brought about significant changes in investment priorities with the democratisation of digital media and new investment avenues, which will continue to outlive the pandemic.
The real estate market in Dubai has its own set of challenges, including understanding the standard specifications and laws of enforcement of the country. You need the right business consultant to take you through the business start-up phase if you plan to develop your real estate services in Dubai. Get in contact with us for more.