UAE Real Estate Boom?

The UAE is about to experience yet another real estate boom, and this time it may not be limited to just Dubai alone.

The real estate sector in the UAE has had its ups-and-downs over the years. The first real estate boom of Dubai began around the turn of the millennium, when mega developers, such as Emaar Properties, Dubai Properties, and Nakheel Properties, began building high-rise apartments at an industrial scale to meet the demand caused by the city’s growing expat population.

Thanks to a decree issued in 2002 by HH Sheikh Mohammed bin Rashid Al Maktoum, foreign nationals were for the first time allowed to own property in the city of Dubai—albeit with certain limitations.

This incentivized buyers, with many purchasing houses as a form of investment. It paid off, and many investors made their fortune between 2002 and 2008, as property prices went up severalfold. Developers confidently upped their game in those years’ healthy market, going for more ambitious projects such as the Palm and Dubailand,

Nothing good can last forever. With the developers continuing to launch one megaproject after another, declining demand, and a global financial crisis looming in, the UAE’s real estate market cooled down around 2010.

The sales dropped by as much as 50% and the market entered a 5-year period of stagnation. The sector, however, did not accept defeat and made a comeback in mid-2010s. The market, which had properly matured, has been developing slowly but surely ever since.

The business has been steady and the sales decent, though the city’s real estate market has not seen anything like the excitement of the booming 2000s.

This was, after all, to be expected. All mature markets calm down almost everywhere in the world. Mature markets rarely register tremendous growths, though they do not collapse with the first sign of adversity, either.

It was a good sign when Dubai’s real estate sector did not shrink hugely during the pandemic—at least not more severely than other comparable markets in Asia and Europe.

But perhaps the UAE’s market can be an exception and go through another real estate boom even during its maturity.

Following a series of regulatory reforms and legislative initiatives, the market may be on the verge of a second golden period in 2022, some two decades after the first one. Market analysts have forecasted a compound annual growth rate (CAGR) of 8% over the next five-year period.

While a steady number of new properties will hit the market each year during the forecasted period, chances are that the prices will not skyrocket, but instead grow at a reasonable rate of roughly 3-8%.

The growth will be driven not just by the market’s post-pandemic optimism, but also by a set of changes in property ownership and residency laws for foreign nationals and—simply—supportive economic reforms.

Shortly before the 15th anniversary of the formation of the UAE, some 40 new laws were announced which are intended to become landmark reforms in the nation’s modernization.

Some of the laws signed by the late UAE president, Sheikh Khalifa bin Zayed Al Nahyan, are particularly relevant to the real estate sector. The new visa framework, dubbed the Golden Visa rules, makes it easier for expats to stay in the country for the long term.

Among possible ways to receive a Golden Visa is purchasing a property worth AED2 million or more, which will stimulate the sales of properties in the UAE’s freeholds. Shortly after the coming into effect of the new rules, sales in Dubai have already gone up over 50%, with 43,000 units being sold in 1Q2022.

This can usher in a period of sustainability for the sector, in the sense that buyers will be paying a fair price, while expecting the value of their residential units to grow slowly but surely over the next couple of years.

Property developers, meanwhile, will continue to launch new projects, secure in the knowledge that the market will not be paralyzed by oversupply. It will be a period of stability in the property market, which despite being free of wild rides for anyone, will keep both developers and customers reasonably content.

Another trend is the expansion of the market outside the city of Dubai. Traditionally, Dubai has been the epicenter of real estate enterprises targeting foreign buyers. However, emirates such as Abu Dhabi and Sharjah are now also claiming their share of the market.

In Abu Dhabi, alone, over 11,000 high-end apartment units will be supplied to the market by the end of 2022, many of which will be purchased by expats. Freehold areas of Abu Dhabi such as Yas Island, Reem, and Lulu will also see more construction activities, following the relaxation of visa regulations.

A similar sequence of events had set the stage for the property boom of the 2000s, and we should wait and see whether history will repeat itself.