The Dubai Real Estate Q2 2015 Report

The real estate sector was a major player in the continuing expansion of the economy last year, accounting for 13.3% of GDP—good for third, thanks in part to the Government of Dubai, which strongly contributes to the expansion of many areas that are connected with the real estate sector. Now that we’re more than halfway through this 2015, let’s take a look at the Dubai real estate market for the second quarter of 2015.

Apartments

The Dubai property market for apartments slowed down on the second quarter of 2015, with average apartment sales prices across the city dropping to the same level as in the first quarter of 2014.

The market price “correction” didn’t come as a blindsided surprise to industry experts. When analyzing the volume of transactions, the prices did not keep pace with the expected sales price growth but instead rose at a slower rate. Demand declined slightly in the first quarter and rather more steeply in the second quarter of this year.

However, there were some spots that are still going strong. Average sales prices in Business Bay have actually risen, albeit in a gradual rate over the past few years even though demand has remained constant. The district currently has more than 40 developments currently under construction by various developers, the majority of which are expected to be finished and handed over in 2016 and 2017. Additional developments are currently on the pipeline.

In Downtown Dubai, prices were 19% lower than at the 2014 peak. During the second quarter of this year, demand has been steady and at a healthy level.

Contrary to the two situations above, sales prices in Dubai Marina and Jumeirah Beach Residence (JBR) are declining which causes buyers’ interest to pick up. The same goes with Palm Jumeirah. Sales prices are 12.5% lower than at 2014 peak. There are 20 projects currently are under development on the island with more at planning stage.

Villas

Sales prices of villas have been falling for the third quarter in a row, since late 2014 to date. However, buyers’ sentiment has picked up due to the continued fall of prices. As a result, the number of transactions recorded in the villa segment has started to rise again.

Following the general trend across the emirate, the volume of transactions of prime villas in high-end developments within the Jumeirah Park, Jumeirah Islands, Emirates Hills and Arabian Ranches communities has kept increasing since late 2014. 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

Was the Forecast for the 2015 Real Estate Market Correct?

The real estate market in Abu Dhabi has experienced an optimistic recovery from the worldwide economic downturn. For the past two years, the reports have yielded positive numbers, indicating a maturing health in the Abu Dhabi real estate sector. Last year, sales growth in real estate has seen a double digit rate increase. Villa sales prices rose by 16% and apartments up 15%. Rent rates increased by 10%, and 9% for apartments, villas respectively—a trend expected to continue until 2015.

Were they right?

In the latest real estate performance reports, the second quarter of 2015 saw an encore performance across all asset classes, although it wasn’t a repeat. The growth of demand has slowed down this year due to the sluggish performance oil sector, UAE’s primary trade commodity. This has lead to a reduction in government spending and sentiment, which affected the real estate market and others. While short term supply and demand remains above the line, the continuing growth of this particular sector depends on the government spending plans.

For the Residential Sales market, while prices have remained stable over 2015, there has been a slide in transaction volumes, although developers are still generally successful with new product launches. Residential Rents have remained stable this quarter due to limited demand.

Office space demand remains stagnant, again due to the slowdown in the oil sector and government infrastructure investment. In spite of this, Grade A office rentals have remained stable due to minimal vacancies in quality projects. However, office completions in tow throughout the year are expected to increase the market-wide vacancy rate.

Retail rentals remains 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 on 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.

SOURCE: Roots Land Real Estate

Dubai Real Estate Development Legal Requirements

These are what you need to know about Dubai Real Estate Development Legal Requirements.

Real Estate Licenses 

Licenses are needed in order to proceed with a real estate development project. This is the first rule in real estate development before any developer can proceed with even making a property available for sale.

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.

Without these opening the escrow account that shall be accompanied by an agreement made in writing between the real estate developer and the escrow (the bank in which the payments made by purchasers of units sold off-plan or by the financiers of the project are deposited) is impossible.

Real Estate Developer’s Obligation

Real estate developers need to be able to deliver the property they applied a license for, especially with the investor’s money on the line. But any delays in the performance of their obligations to complete the project, while an inconvenience, is very understandable and an expected risk. One cause of delay is the fulfillment of requirements. These include the approvals to be obtained from governmental bodies and the duties of the developer, the main contractor, and subcontractors.

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

Accordingly, the lawmaker has 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.

Source: Roots Land Real Estate

Dubai Property Market Update - Dubai Properties

The Dubai real estate sector and the UAE have experienced progress during the last few years, and we have seen this continue to 2014. The industry has developed in terms of best practice, regulations and laws to protect investors and developers. Improvements on the mortgage regulations have made a positive contribution to ensuring a controlled and sustainable market growth.
      
The latest industry reports have seen a gradual pace in price growth, which means that these developments are effective and have positively impacted the market behaviour.

From the perspective of Dubai Properties, the market has been in a favorable position and strategies have allowed them to experience sustainable growth across their portfolio in 2014.

They have seen strong demand from investors for the new residential project, Dubai Wharf, that was launched at Cityscape. In addition, other Dubai Property developments have sold-out and prompted the release of further units such as in Mudon and Remraam. 

They believe that 2014 will be remembered as a successful year for the real estate market, and for Dubai Properties in particular. Their strong sales has been a clear indication of the positive market conditions, and successful strategy to develop practical, high quality, and sustainable projects in every segment and area of Dubai that offer essential amenities and facilities to enrich the lives of residents and end users.

Dubai Property has already made over 36,000 residential units, 2.8 million sq. ft. of office space and over 1.2 million sq. ft. of retail space across key areas of Dubai. The main projects we have launched in 2014 include: Mudon, Remraam, Manazel AlKhor, and Dubai Wharf, some of which experienced successes.

Dubai Properties will continue to develop a growing portfolio of retail, commercial, residential, hospitality and mixed-use projects, and they have a strong pipeline of projects across all sectors that are tailored to meet the needs of real estate investors in the region. They will continue to align their business with the current market demand by launching new projects that provide strong investment opportunities.

Collectively, the real estate in Dubai is continuously experiencing strong growth with investors looking for ‘value for money’ projects across the city with completed infrastructure, accessibility and quality building and finishing. Our projects will continue to meet this market demand in line with Dubai’s growth across the residential, commercial & retail sectors while continuing with the strategy to develop projects in prime locations of Dubai.

Winning the Expo 2020 presents a huge opportunity for Dubai real estate industry, and as a leading developer with a wide range of projects in every segment and area of Dubai, we are well placed to capitalize on the increasing requirements which this will bring. 

Going forwards, we plan to launch more projects that cater to the increasing population expected in Dubai over the coming years, from affordable apartments to villas and townhouses and high-end luxury accommodation across key areas of Dubai.

Source: Roots Land Real Estate