Savills, the leading global real estate consultancy, today shared their real estate outlook following the official announcement by the Central Bank of the United Arab Emirates (UAE) earlier this week. The comprehensive economic scheme includes a 100 billion dirham ($27 billion) economic plan aimed at containing the impact of the coronavirus outbreak.
Richard Paul, Head of professional services and strategic consultancy for Savills Middle East said: “The exact impact of COVID-19 is unknown, but any disruption to the real estate markets is likely to be a near term delay or a knee-jerk reaction rather than a fundamental downturn over the long term. There will be inevitable impacts on economic growth, tourism, high-street retail spends, and so forth but there are longer-term outtakes such as accelerating trends within flexible working, online retail and improving the supply chain.”
The strong fundamentals of the local economy including foreign currency reserves of more than AED 405 billion and monetary measures introduced by the Central Bank will help weather any economic slowdown caused by the pandemic. Most of the companies across the UAE have been successful in implementing remote working options for majority of their staff, thereby ensuring business continuity and sustained economic momentum.
Murray Strang, Head of Dubai Office at Savills Middle East said: “The real estate sector in the country has remained largely resilient during the first two months of 2020. The introduction of a stimulus package by the Central Bank will be a shot-in-the-arm to the property market in the medium-to-long term. We have already witnessed a gradual increase in demand, especially across the residential sector in 2019 and a further relaxation in LTV ratios will encourage more investment appetite into the sector. Banks will likely step-up their exposure to real estate and the construction sector, a spike in re-mortgage activity may also be witnessed in the coming months due to attractive borrowing rates and other promotional discounts.”
According to Savills, transaction activity by residents may also increase. Strang added: “A continued softening in asset pricing and completion of new projects over the next few months will offer value proposition to end-users to upgrade their current real estate to better quality stock. However, there is a possibility that the market may witness a slowdown in demand from international investors due to restrictions in travel. At a corporate level, key decisions relating to fresh office space requirements may get delayed or postponed, which may in turn increase the number of renewal activities as a knock-on effect.”
Residential transactions* in Dubai remain strong for the first two months of 2020
*Transaction for the month for January and February only
In Abu Dhabi, the Abu Dhabi Executive Council directed by Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces has also announced this week 16 new initiatives to support businesses and the community. The fast-tracked #Ghadan21 initiatives to be implemented immediately will enable Abu Dhabi to adapt swiftly to both current and future challenges.
Edward Carnegy, Director- Head of Abu Dhabi office at Savills Middle East said “The upfront financial requirement to buy property has reduced as individuals now have an additional 5% as part of the relaxed LTV norms. The Abu Dhabi government has also waived off (for the entire year) real estate registration fee of 2%. As a result, transaction activity by residents may increase as individuals who are currently renting will find it more affordable and lucrative to purchase their own property.”
In our first episode of Cityscape Intelligence Podcast, Murray Strang, Director and Head of the Dubai office at Savills shares his thoughts on how the pandemic has impacted the retail, industrial, commercial and residential sector in the UAE and the role technology will play in the industry’s road towards recovery.