Thursday, August 27, 2015

Getting Real with the Real Estate Sector in Dubai for the Q2 of 2015

With the expansion of UAE set to continue for a sixth consecutive year this 2015, it’s safe to assume that the real estate sector will not buck the trend this year.

The real estate sector accounted for 13.3% of GDP last year, the third highest contributor. The Government of Dubai strongly contributed to this expansion, backing major developments including the new Al Maktoum International Airport and the extension of Dubai International Airport.

Apartments

The Dubai property market decelerated during Q2 2015, with average apartment sales prices falling across the city, matching that of Q1 2014. Experts have attributed this to the maturing of the market and correcting values of apartments. Transactions have risen, although not at the rate reflected by forecasts.

For prime apartments, it just keeps getting better. As average sales prices in Business Bay have raised gradually over the past few years, demand has remained constant. The district currently has more than 40 developments currently under way, with the majority expected to be finished and handed over in 2016 and 2017. In Downtown Dubai the view is different. Prices were 19% lower than that of the 2014 peak. However, during the second quarter of this year, demand has been steady and at a healthy level. Sales prices in Dubai Marina and Jumeirah Beach Residence (JBR) are declining but buyers’ interest are picking up. Palm Jumeirah sales prices are 12.5% lower now than at the 2014 peak. There are 20 projects currently are under development on the island with more on the way.

Villas

Villas have been experiencing falling sales prices for nine months now. This has increased buyers’ sentiment for this quarter, with transactions recorded in the villa segment starting to rise again.
Prices for prime villas in high-end developments within the Jumeirah Park, Jumeirah Islands, Emirates Hills and Arabian Ranches communities have kept increasing since late 2014. However, the prices in the first three areas declined in the second quarter, while sales prices at Arabian Ranches’ rose by 5%.

Among these prime communities, Arabian Ranches supply is the highest with more than 4,000 villas. The community is also the fastest growing. By 2018 Emaar, the developer will deliver nearly 2,500 new homes including the Mira Oasis, Lila, Azalea and Samara Rosa, and Rasha Villas sites.

SOURCE: Roots Land Real Estate

Thursday, August 20, 2015

Abu Dhabi Real Estate Market Summary for Q2 2015 with 2014 Comparison

In reports reflecting sales growth in real estate for last year, 2014, we’ve seen a double digit growth for Abu Dhabi real estate market. Villa sales prices rose by 16% and apartments up 15%. Rent rates increased by 10%, and 9% for apartments, villas respectively.
It’s been said that investors in Abu Dhabi’s real estate sector can expect sustained rental growth towards 2015.

Abu Dhabi Real Estate Market in Q2 of 2015

This forecast has indeed been positive in both its fulfillment and growth. The second quarter (Q2) of 2015 saw continued stabilization across all asset classes, following the 2013-2014 market recovery. However, the pace of demand growth has slowed due to the decline in oil prices. The decline of the oil sector has lead to a reduction in government spending and sentiment, affecting the real estate market. While short term supply remains under control, the extent to which stable market conditions will continue very much depends on government spending plans.

For the Residential Sales market, while prices have remained stable over Q2 2015, there has been continued downward pressure on transaction volumes, although developers are still generally successful with new product launches. Residential Rents have remained stable this quarter due to limited demand growth, but with vacancies remaining low in high quality, well-located schemes.
Office demand remains subdued due to contraction in some sectors and a slowdown in the oil sector and government infrastructure investment. In spite of this, Grade A office rents have remained stable due to minimal vacancies in quality stock. Further office completions throughout the year are expected to increase the market-wide vacancy rate, but with Grade A rents being upheld.

Retail Rents remained stable this quarter and this is expected to continue in the short-term. A number of Super Regional malls are set to enter the market from 2018, which will partly be supported by new population and tourism growth.


The Hospitality market witnessed solid growth in hotel guests above 2014 levels driven by wide ranging initiatives to grow the tourism sector. ADRs have also registered an increase of 4% in YT May compared to the same period in 2014. Hotel occupancies registered 77% in YT May reaching the same levels as 2014.

Friday, August 14, 2015

Dubai Development Legal Requirements That You Need to Know


The Government of Dubai developed clear and simple conditions for licenses. They support conditions to help the real estate in UAE thrive with strict requirements to determine the duties and liabilities of the parties involved in the real estate development together. These actions ensure transparency and bolster confidence in the real estate sector in hopes to attract investors to the city.

Licenses 
In order to proceed with a real estate development, the legal body governing such a business in the Land Department of the Government of Dubai, which is responsible for maintaining a special register for real estate developersand determines the banks in which the developers and financiers can deposit the installments of the real estate units under the account of the real estate project, should administer licenses. Accordingly, since inception, the real estate developer has to open the escrow account, in which the amounts paid by the purchasers or financiers of the real estate units sold off-plan are deposited.

Article (3) of Real Estate Development Escrow Account Act (8) of 2007 stipulates that the provisions of this law apply to those who sell units off-plan and receive payments from purchasers. Further, Article (4) emphasizes that no developer may engage in such business, advertise in local or foreign media or participate in exhibition for promoting real estate units or properties sold off-plan unless it is registered in and licensed by the Land Department in Dubai represented by its director general.

Article (7) of the Act stipulates in relation to the real estate escrow account that any developer who wishes to sell units off-plan must submit a request to open an Escrow Account and attach the following documents:
(1) A certificate of membership in the Dubai Chamber of Commerce and Industry;
(2) Trade license;
(3) Title deed of the plot to be developed;
(4) A copy of the contract concluded between the master developer and the sub-developer;
(5) The initial architectural designs and engineering drawings approved by the Competent Entities and the master developer;
(6) A financial statement of the estimated cost and revenues of the project approved by a certified chartered auditor;
(7) An undertaking by the sub-developer to start the construction works of the project upon having obtained the approval of the master developer for off-plan sale, or an undertaking by the master developer if there is no sub-developer; and
(8) A standard sale contract between the Developer and the purchaser.

Duties and Responsibilities of Real Estate Developers
Because of this, the lawmakers has not left this issue to the will of developers or investorsInstead, the Government of Dubai has specifically determined the standards relating to the issues that the real estate developer may encounter while executing the real estate project.

The review of the real estate law indicates the cases where the real estate developer is deemed in default in the completion of the project, Article (21) of the Executive Council Resolution No (6) of 2010 approving the Executive Regulations of Law No (13) of 2008 Regulating the Interim Real Estate Register in Dubai expressly states the reasons deemed beyond the reasonable control of the real estate developer, as follows:

(1) If the plot where the project is to be constructed is expropriated.
(2) If a government body has frozen the project for re-planning reasons.
(3) If a building remains or manuscripts are discovered within the site of the project.
(4) If the Master Developer makes alterations to the project site entailing the alteration of the project boundaries and area in a manner affecting the performance of the sub-developer’s obligations.
(5) Any other grounds to be estimated by the Agency. 

Strict Penalties for Violations
Lawmakers have ensured the proper guarantees for both investors and banks. In this regard, Article (16) of the Real Estate Development Escrow Account Act (8) of 2007 stipulates that without prejudice to any penalties stipulated by any other legislation, an imprisonment sentence and a fine of at least one hundred thousand Dirhams (AED 100,000), or either penalty, shall be imposed on those who:

(1) Engage in Real Estate Development activity in the Emirate without a license;
(2) Provide the Competent Entities with incorrect documentation or information in order to obtain a license to practice the Real Estate Development activity;
(3) Knowingly offer for sale Units in fraudulent Real Estate Development projects;
(4) Steal, appropriate, or forfeit any amounts of money delivered to them for the purpose of implementing Real Estate Development projects;
(5)As for auditors, deliberately preparing a fraudulent report upon auditing the financial standing of the Developer or deliberately failing to disclose material facts in their report;
(6) In the case of consultants, knowingly certifying fraudulent reports on a Real Estate Development project; or
(7) In the case of Developers, dealing with a real estate broker who is not registered on the Real Estate Brokers Register maintained by the Department in accordance with Bylaw No. (85) of 2006 concerning the Real Estate Brokers Register in the Emirate of Dubai.

Furthermore, Article (17) stipulates that the real estate developer shall be de-registered and punished with penalties set forth in Article (16) in the cases where:

(1) It is declared bankrupt;
(2) It fails, without an acceptable reason, to commence construction works after the lapse of six (6) months from the date on which he was granted permission to sell Units off-plan (as may be estimated by the Land Department in Dubai);
(3) The license granted to the Developer by the licensing entity is revoked;
(4) It commits any of the violations stipulated in items 2, 3, 4 and 5 of Article (16) of this Act; or

(5) It violates any of the laws and bylaws regulating the activity of Real Estate Development in the Emirate.

Wednesday, August 5, 2015

Abu Dhabi experiences substantial growth in the real estate sector for 2014, 2015 looks more promising

With Villa sales prices rising by 16% and apartments up by 15%, looks like the 2015 real estate market would be a lot better and healthier.

Even rental rates increased by 10%, and 9% for apartments and villas respectively. This means that the demand for prime spaces continues to grow.

As a matter of fact, investors in the real estate sector in Dubai and Abu Dhabi can expect sustained rental growth and relatively stable capital values in 2015, due to the strong performance in 2014 (according to the latest Abu Dhabi real estate report from Middle East’s largest independent full service real estate company, Asteco).

In the Abu Dhabi Property Review: 2014 Highlights & 2015 Outlook, Asteco noted that Abu Dhabi’s real estate market had strengthened over the recent years and this trend is set to continue in 2015, with continued rental growth across all sectors, encouraging investment.

Average sales rates for apartments increased by 15% and villas 16% in 2014, with a strong performance in H1, and stability throughout the year. Additionally, volume of transactions declined in H2 due to the shortage of quality stock for sale in the secondary market, quite a welcome news in the real estate sector. The high sales volumes experienced at the newly launched projects in Ansam, Al Hadeel and Mamsha Al Saadiyat proved that demand for quality projects exists.

“Popular master-planned developments for sale included Saadiyat Island and Al Raha Beach while Reem Island proved to be an attractive area providing more mid-market units. We expect apartment sales prices to remain stable this year as the market becomes more competitive due to the imminent handover of new projects,” said Jerry Oates, General Manager, Asteco Abu Dhabi.

Year-on-Year comparisons starting from 2008 to 2014 highlight the continuous apartment sales price growth since 2012, up on average by 48% for all areas combined. Sales prices in Al Muneera at Al Raha Beach is now rated at AED 1,425 per square foot on average, up 21% compared with last year. Meanwhile, rates at Reef Downtown also climbed 21% to an average of AED 1,000 per square foot. Marina Square also saw a 17% increase to an average of AED 1,375 per square foot.

Villa sales prices witnessed strong growth too, growing 47% on average for Al Raha Beach, Golf Garden and Al Reef Villas during the period.

According to the report, the villa sales market will not be experiencing any drastic movement as there will be limited prime and high-end projects available for sale in the primary and secondary markets in 2015.

Rental rates for apartment were up by 10%, while villas rentals rose by 9%. A prime two-bedroom apartment currently rents for AED 175k-180k per annum with high-end units achieving AED 140-175,000.  Mid to low-end units records an affordable AED 90k-120k.

Villa rental rates are expected to increase during 2015 due to a shortage in quality villa units with occupancy rates expected to remain high.

An average four-bedroom villa could be leased for AED 239,000 per annum in Q4 2014.

The biggest increases in rental rates in 2014 were on Saadiyat Island and Marina Square on Reem Island. The year was also marked by a positive level of transaction activity as tenants continued their flight to quality.

New mid to high-quality developments at still relatively affordable rents are encouraging relocation by tenants to upgraded accommodation, with older properties and lower quality projects being placed under increased rental and occupancy pressure.

The Abu Dhabi rental market in 2015 is expected to see continuous strong levels of demand. A range of new projects are due for handover in 2015 including an anticipated 13,000 apartments and villas which will come online, will have an impact on the Abu Dhabi real estate market by creating greater competition, particularly in apartment rents. - Jeremy Oates

Asteco expects this to continue in 2015 with occupancy rates in popular developments maintaining their current high levels. 

“The Abu Dhabi rental market in 2015 is expected to see continuous strong levels of demand. A range of new projects are due for handover in 2015 including an anticipated 13,000 apartments and villas which will come online, will have an impact on the Abu Dhabi real estate market by creating greater competition, particularly in apartment rents,” said Oates.

Abu Dhabi’s office market was stable in 2014, as landlords of single-owned buildings maintained their asking rates. However, it is anticipated that as new developments such as ADDAX Tower on Reem Island hand over during the year, rates for multiple-owned office space in the Investment Areas could come under pressure as individual landlords compete to secure tenants. 


Since 2013, the Abu Dhabi real estate market has continued to strengthen, a trend Asteco predicts to continue throughout 2015.

Source: Roots Land Real Estate