The Dubai real estate market shows signs of stability

Opportunities for developers and investors continue to gain traction on approach to 2020

Deepak Jain, Managing Director, Mont Hill, Dubai.

As one of the region’s most anticipated real estate events closed its doors for another year, what are industry leaders saying about Cityscape Global 2017 and what are their views on market sentiment for the year ahead in Dubai?

Deepak Jain, the Managing Director of Mont Hill, a Real Estate Advisory and Services Firm based in Dubai, feels that the outlook is bright.

“Last year’s Cityscape Global seemed more subdued, but this year I definitely saw a difference. There was more activity and a renewed energy that flowed throughout the exhibition halls.”

Cityscape Global’s decision to introduce real estate sales this year was an excellent move, according to Mont Hill, and one that was welcomed by local and international developers, brokers and investors.

“Following the quiet summer months, allowing developers and brokers to sell in a public forum kick-started the beginning of the high season.”

And, with Mont Hill reporting a shift in transaction data over the past 12 months, they believe that owner occupiers are returning to the city state.

Secondary market data for residential property shows an increase of approximately nine percent in transaction activity between the second half of 2016 and the first half of 2017.

“The transactional activities in the secondary market are starting to rise, and this is a good sign for the real estate market overall. It means that investors are looking at Dubai in the long term rather than short to mid-term”.

But while Jain welcomed the return of the owner occupier, he also noted a trend in smaller unit sizes at this year’s event.

“Smaller unit sizes are generally more suited to the investor market, whereas owner occupiers tend to prefer slightly larger unit sizes, especially in the premium and luxury segments”.

He also noted the intense competition from developers on pricing, payment plans and promotions. While the introduction of competitive payment plans is good news for consumers, developers need to be mindful of cash flow and rising development costs.

“The increasing number of flexible payment plans is particularly helpful for international clients who face constraints on the expatriation of funds. It has also been fundamental in driving the demand for more affordable housing projects.”

He added, “But, the smaller developers especially need to manage their cash flows very carefully to ensure they have enough funds to complete their projects on time and handover as per schedule. In addition, they also need to optimise their development costs to ensure healthy profit margins”.

But apart from this, what else caught his eye?

“I noticed that developer activity was on a high. That developers were coming together to form multiple joint ventures, tackling elements of more sizeable master plans together and by specialty. There is trend of ‘new projects in old locations’ instead of large scale projects in remote locations.”

Another observation was the return of sub developers, who are now very active. The increased demand for more affordable housing in prime locations has carved a gap in the market niche developments.

Smaller developers are agile enough to attempt to meet the demands of smaller groups of clients, looking for unique combinations when it comes to lifestyle and price-point. And, this has led to more aggressive marketing strategies from developers across the board.

“Developers’ marketing and branding strategies were much stronger prior to and during this year’s event with more focus on digital marketing, however, there is still some way to go from what I have seen on offer at European exhibitions.” He said.

“Local developers still seem to shy away from investing in what they don’t know. Increasing online media budgets is all well and good, but content and proposition is key for audience engagement.  As local developers are now competing on an international stage they need to be ahead of the game in all aspects of digital marketing.”

As well as what is already happening in the city, Jain also noted opportunities that developers should take advantage of as we approach 2020. One of the most prominent is Transit Orientated Developments or TODs as they are referred to in the industry.

“Transit Orientated Developments are communities that are developed around public transportation hubs such as train or bus stations. I see huge potential in Dubai for developers to create these types of communities, particularly around the many metro stations we have in the city”.

In 2016, the RTA reported that 17.184m passengers used the Dubai Metro and there are approximately 49 metro stations positioned across the city. This presents a real opportunity for developers to develop residential, office, retail and other amenities in integrated walkable areas to accommodate people of all ages, incomes and lifestyles.

What are some of the key issues for developers to consider in the current market environment?

“The market has evolved from the low, medium and high approach and is much more granular and multi-tiered.  Developers must focus on their target market and customise their projects accordingly”.

He added, “They should be mindful of development costs that are dependent on design management, procurement and value engineering. Finally, branding and marketing are key to ensure that developers are positioning themselves positively in front of the right audience”.

So, in a nutshell what is the outlook for the Dubai Real Estate market according to the Real Estate Advisory and Services Firm?

“My outlook is that for now the market is showing signs of stability.”, says Jain. Development in the city is highly active and the opportunities are there, obviously the risk of oversupply always remains, however, I do feel that market capacity ensures that oversupply risk is controlled.”

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