The government’s commitment to infrastructure spending and development projects will assist stronger growth forecasts, with the UAE’s safe haven status making it a favourable destination to live in, invest and visit, according to Knight Frank’s latest report on the UAE property market.
The International Monetary Fund (IMF) in its latest World Economic Outlook titled ‘Too Slow for Too Long’, has reduced its full year global growth forecasts for 2016 to 3.2% (from 3.4% in January 2016). Despite that, growth forecasts remain higher than 2015 levels (3.1%) and are projected to increase to 3.5% in 2017. While growth is forecast to strengthen, the slowdown in China, further declines in commodity prices, and the slowdown in investment and trade continue to represent downside risk to global growth.
In the Middle East specifically, the impact of lower oil prices resulted in the revision of government budgets, reprioritisation of spending and removal of energy subsidies. These changes have resulted in sizable shifts in relative prices since 2011, with headline inflation rates increasing from 0.8% in 2011 to 4.0% in 2015. Coupled with the appreciation of the US dollar, household disposable income tightened and purchasing powers reduced.
But, the latest report by Knight Frank covering the UAE’s real estate sector, shows a positive outlook over the long-term despite a slow start to 2016. The government’s commitment to infrastructure spending and development projects will assist stronger growth forecasts, with the UAE’s safe haven status making it a favourable destination to live in, invest and visit, according to the report.
With the industrial and logistics sectors being a main pillar of Dubai’s non-oil economy, the sluggish performance of global trade markets is likely to reflect on the performance of the industrial sector in the short-to-medium term. Consequently, rents are expected to remain stable as occupier demand softens.
In Abu Dhabi, while demand has slowed significantly on the back of the decline in oil prices, the limited supply of quality industrial space is expected to keep the market stable.
In the long-term, the UAE’s commitment to diversifying its economy through continued investment in developing the sectors’ supporting infrastructure, such as Jebel Ali Port, and enhancing legislation is likely to boost the industry further. The retail property market in Dubai & Abu Dhabi is expected to see slower growth levels over the second half of the year, as economic uncertainty and unfavourable currency exchange rates continue to impact both tourist and domestic spending.
Knight Frank expects another growth cycle for the retail market associated with growth in the hospitality and tourism industry. Given Dubai’s position as one of the top five global cities that matter to private high net worth individuals, based on Knight Frank’s global Wealth Report, it expects the emirate to continue attracting investments both regionally and globally. However the outlook for the emirate in general and the real estate sector in particular depends on a number of global and regional fundamentals.