- While the Dubai residential market is now close to bottom of its cycle, 2017 is likely to bring additional challenges in other sectors of the market
The year 2016 will be remembered for the short-term challenges of adjusting to the “new normal” of lower oil revenues, which impacted the United Arab Emirates’ (UAE) economy and its real estate sector, according to JLL’s ‘2016 Year in Review’ report.
The UAE’s GDP growth declined from 4.5% in 2015 to just 2.3% in 2016 and employment growth levels remained relatively unchanged at 1.5%, as companies consolidated their operations, particularly in the oil and banking sectors.
However, according to the report which looks at the UAE’s real estate market, the medium-term picture for the UAE economy is more positive.
“The real estate market in the two largest emirates of Dubai and Abu Dhabi reflect their relative economic strengths,” said Craig Plumb, Head of Research at JLL MENA.
“The greater diversification of the Dubai economy and the earlier downturn of real estate prices from mid-2014 means the Dubai residential market is now poised closer to its cyclical trough, while prices may fall further in Abu Dhabi.”
“As the regional economic situation improves, an increase in GCC tourism is expected to contribute to the recovery of the hospitality and retail sectors, reflecting positively on the UAE real estate market as a whole”.
The report also highlights that Dubai is benefiting from increased spending on real estate projects in the lead up to the Expo 2020. Data from MEED projects suggests new construction tenders across the UAE could increase by more than 95 percent Y-o-Y in 2017, with the majority of this additional spending on projects in Dubai. While not all of these projects are likely to materialise, spending levels are likely to increase on their 2016 levels, which were themselves higher than 2015.