Dubai realty stays firm in '13 

(MENAFN - Khaleej Times) Spurred by increased real estate investment from China and South Korea, Dubai's real estate sector will continue to pick up momentum in 2013 on the back of a broader based recovery, Jones Lang LaSalle said on Monday.

The leading real estate investment and advisory firm in a keynote research said Dubai real estate sector recovery will gain traction in the backdrop of a steady economic growth.

"With an increase of 65 per cent in the number of transactions in 2012, the Dubai real estate sector will continue to shift up a gear in 2013, experiencing a broader based recovery on the back of continued economic growth. Abu Dhabi remains 18 to 24 months behind Dubai and the market is not expected to experience an upturn in 2013. The foundations are however being laid for a recovery from 2014, with a number of major infrastructure projects scheduled to start later this year," said Alan Robertson, chief executive of Jones Lang LaSalle (JLL) Mena.

Dubai stock market index hit three-year high on Sunday as shares of real estate giant Emaar recorded steep rally reflecting the growing investor confidence in the emirate's recovery. Reflecting the steady rebound, average rental rates for residential property in Dubai increased 17 per cent last year while villa rentals rose 14 per cent, according to real estate consultants CB Richard Ellis.

In JLL's '2013 top trends for UAE real estate,' Robertson noted that the real estate in both markets would benefit from increased economic activity between the UAE and East Asia, specifically China and South Korea, as well as sub Saharan Africa and Australia.

"We also look forward to the Expo 2020 announcement in November. Success will be a significant boost to the domestic real estate market, hence our continued support as an official bid supporter." Top among the key trends affecting the UAE real estate market this year is the return of confidence to the Dubai market.

"Factors like the UAE's economic growth, increased employment, Dubai's safe haven status and improved price/rental performance have led to continued market confidence. With many real estate project announcements over the past six months, this increased market confidence has become more pronounced. The government is keen to create a more stable market environment as illustrated by the new mortgage caps from the UAE Central Bank," the report noted.

Dubai's government and several state-backed entities have announced new projects in recent months, including Mohammed Bin Rashid City, which will host the world's biggest shopping mall, as well as a 3 billion theme park project in Jebel Ali

The research, however, noted that funding constraints would apply a natural brake on the pace of new development. "Usual real estate financing routes such as off plan sales, IPO/bond issues or bank lending are already challenged. LTV ratio caps might also act as a deterrent as it will limit availability of mortgage finance to end users. In 2013, new development funding is likely to come from overseas cash purchasers and private money from other businesses."

JLL expects increased real estate investment from China and South Korea due to greater business cooperation with the UAE.

"Chinese involvement is particularly pronounced in the retail sector and is likely to continue in 2013 along with possible investments in the hotel and tourism sectors. There is also increasing interest from Sub Saharan Africa, particularly from oil rich countries like Angola and Nigeria."

Among other key trends, the report noted that buyers and tenants would have a multitude of choices in some sectors in 2013, with significant levels of new supply acting as a constraint on the overall performance of the UAE real estate sector, possibly offsetting the positive impact of improved market sentiment.

"In 2013, there will be greater awareness of the importance of both the operational and financial aspects of property management," the JLL report said.

The report argued that with continued progress in 2012, sustainability is expected to move into even greater focus in 2013.

The research report said the government would remain a major player influencing the UAE real estate market in 2013. "Initiatives such as the UAE Central Bank mortgage cap, approval of the Dubai Urban Planning Framework and consolidation of real estate players in Abu Dhabi will better regulate or tighten control on market conditions. While initiatives such as regulation on housing allowances for Abu Dhabi government employees, announcement of major government back projects and Dh330 billion stimulus package in Abu Dhabi will stimulate demand and market performance."

"Rents for selected prime office buildings are likely to increase for the first time since 2008, but this will not be true of all office properties in every location. Further analysis suggests that Dubai has passed through the peak of its construction cycle so increased demand will continue to reduce over supply," said Craig Plumb, head of research, Jones Lang LaSalle Mena.