The UAE cabinet announced a new federal budget of AED 60.3bn ($16.4bn) in September, paving the way for a significant increase in government spending that will in turn benefit the Dubai real estate market, revealed JLL’s latest Q3 report.
The proposed budget provides funding for a series of new policies, aimed at stimulating economic growth and investment in the non-oil dependent sectors in 2019, which will positively affect the real estate sector in the medium term.
These initiatives are aimed at reversing the current downturn in market conditions, with all sectors of the market remaining in the downturn state of their cycle in Q3 2018.
Further declines in rents and sale prices are projected over the next 12 months, highlights the report.
One of the new policies shaping the real estate sector is the relaxation of regulatory requirements relating to free zones and the establishment of more ‘dual licensed’ projects where Free Zone and onshore licenced companies can co-exist.
This is partially a response to the growing demand for flexible office space (available on leases of less than one year), an emerging global trend that will disrupt the office market in the future.
The Dubai office sector remained subdued in Q3, with rental prices decreasing further in light of the growing available supply of new and existing space.
“The implementation of new policies and the relaxation of regulatory restrictions, in line with the Vision 2021 goal of further diversifying the Dubai economy, will provide a boost to the real estate market in 2019,” said Craig Plumb, Head of Research, JLL, MENA.
“Earlier this year, UAE approved a new investment law that could allow 100% foreign ownership of companies in specific sectors of the economy to operate outside of free zones by the end of 2018.
“Once implemented, this law will boost Foreign Direct Investment (FDI) and increase demand from overseas businesses, particularly for projects outside of the existing Free Zones,” he added.
Despite the introduction of 10-year residency visas for certain categories of retirees, the residential market has continued to soften, with both sale prices and rents declining further during Q3. Developers focused on the sale of existing inventories by offering increasingly generous payment plans to investors.