UAE Housing Market Analysis

This assignment examines the performance of the UAE's housing market. It delves into the current growth trends, highlighting a slower pace compared to expectations. The impact of Expo 2020 on potential future development and rapid growth within the sector is also explored.

Running head: MANAGERIAL ECONOMICS
Managerial Economics
Name of the Student:
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Executive Summary:
The report aims at put forward a literature review on the housing market of United Arab
Emirates (UAE). The review focuses on the housing market percentage of gross development
product (GDP) and the price movements. The review also focuses on the type of housing and the
preferences of UAE and expats nationals. The challenges, opportunities and the growth prospects
of the housing market of UAE is also discussed in the report followed by a summary.

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Table of Contents
Introduction......................................................................................................................................3
Literature Review about Housing Market in United Arab Emirates...............................................3
Summary..........................................................................................................................................7
References:......................................................................................................................................7

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Introduction
The report aims at analyzing the housing or real estate market in the United Arab
Emirates. The real estate market of Dubai has maintained stability in the year April 2016. In spite
of an annual 9 percent drop across mainstream market there was no such major noticeable
changes in the real estate business (Jll-mena.com 2016). Several factors supported the regulation
of prices in the real estate market that enabled it to outperform the existing market average and
return of consumer confidence. The primary factor that acted as a boon for the real estate sector
was the commitment of the government towards infrastructure spending. The report also put
forward a literature review on the housing market of United Arab Emirates (UAE) followed by a
summary.
Literature Review about Housing Market in United Arab Emirates
According to Zahlan (2016), in UAE, the real estate market operates in a cyclic fashion.
The current pressure in the real estate residential sector of Dubai has encouraged a discussion
amongst the investors of the region and there were concerns regarding significant adjustments of
price. Although most of the markets expected to undergo adjustments there exist a number of
factors that influences the housing market of UAE. This include oil price, presently which is
below long-term average seems to have a direct impact on the confidence of the market. Other
factors include enhanced regulatory environment, increased market maturity and broader
investor profile that eventually influencing the housing sector.
In other words, the economy of UAE experiences fiscal austerity and constant low oil
prices. The overall real GDP estimated to be around 2.3 percent in the year 2016 had a
significant drop from the year 2014 by a 5 percent. According to El Mallakh (2014), consumer

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confidence and weakened business has slowed down the process of growth in the housing market
sector in the year 2016. Thus, the housing market had a constant tendency of softening.
Weakening demand and increased supply amidst fiscal tightening resulting from lower oil prices
have ensured reduction in the number of transactions in the housing market. The property values
in Abu Dhabi, dropped by around two percent around fourth quarter of the year 2016 (Hatemi,
Roca and Al-Shayeb 2014). At the same time, launch of some of the major developments
projects suggested an upturn in real estate sector of Dubai. However, there has been only
marginal improvement in the housing market sector. In the contrary, there has been a significant
change in villa and apartment rent rates and sales prices between the years 2014- 2015. There has
been a significant decline of 6.4% in the residential real estate prices in the last six months after
2014.
The year 2015 witnessed major decline in transactions and property values of the
residential sector. According to the data of Dubai Land Department (Hatemi, Rocaand Al-
Shayeb (2014), the sales volume reduced by around 30 percent by the end of November 2015
compared to the previous year. There is also indication that the average sale price of the housing
market reduced by about 13 percent in some of the locations. However, affordable housing areas
resulted in lower declines and certain cases maintained rental or value yield. Although some
deliveries of the housing market remained subdued in the year 2015 there were suggestions of
around 26000 newer units entering Dubai market in the year 2016.
However, according to Bartheland Vignal (2014), houses in UAE are available in all
sizes like big, small and medium. The lifestyle choices of a person ensure the person’s choice for
his dream home. In Dubai, there is exists an option of choosing between a villa and an apartment.
There also exists different classification based on luxury factor. Therefore, in Dubai, there exist

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lavish residences overlooking the skyline on one side whereas normal-housing units with
necessities comprises of the other unit.
Dubai remains biased towards the rich and therefore have few eye popping luxurious
residences. This is an acceptable phenomenon, as Dubai remains the preferred location amongst
expats who has an enviable net worth. This is also one of the reasons behind the existence of
profitable shopping destinations. The architecture of the luxurious residences is signified by the
sleek architecture, touch of nature and the subtle aesthetics. These residences have completely
furnished apartments and huge townhouses facilitated with amenities like gym, spa, yoga and
sports. Dubai also has residences of superior class. These residences are designed keeping in
mind the upper middle class UAE nationals. These residences primarily focus on the community
lifestyle and the necessities and have one or more selling points. One of the examples of such
superior residence includes the serviced apartments of Azizi with five star facilities. There are
also facilities of normal residence in Dubai that has lower rentals compared to the villas.
However, the scenario is about to change in the next couple of years as the government plans to
implement quotas for the affordable residential projects keeping in mind the betterment of the
lower and middle income classes (Sfakianakis 2014).
According to Saied, Trigunarsyahand Susilawati (2013), the financial crisis, taking place
globally had a severe impact on the housing market of Dubai causing sharp correction of the
prices that persisted for a period of three years. During the year 2012, property prices started to
witness an accelerated rate of growth. There was large money inflows that took refuge because
of regional instability contributed to the economic growth rate of United Arab Emirates and
resulted in inflation in the housing sector. If one considers the construction pace as a parameter
of the real estate market, it showed no signs to cool down. The expected growth of the residential

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units built in Dubai had a growth of 6.6 percent that was only an increase of three percent
compared to previous two years. According to the Jones Lang LaSalle (JLL) projections (2016),
retail property and offices registered a large increase in stocks as well as prices (www.jll.com
2016). Fundamental factors portrays that prices have an emerging trend although it is unclear to
what degree the present growth rate of the real estate prices are sustainable. Thus, in order to
ease the inflationary pressures policy makers introduced tax policies. Economic characteristics
however indicate that the moderation of housing inflation in United Arab Emirates is a
challenging task.
In other words, according to Hamdam(2017), the matured real estate market of Dubai
shows encouraging recovery signs even when the growth is slower. The housing market of UAE
proved to be the strongest market in spite of its stagnancy for a prolonged three years caused
mainly due to regional uncertainty, rising value of dollar and economic slowdown. The
beginning of 2017 showed a rise in the property sale of 13 percent (Sfakianakis2014). In
addition, Dubai also showed a hotel occupancy level of about 84 percent in the year with the
second quarter accounting for an additional 2500 keys that took the figures of occupancy to
about 80000.
According to Yousafzai (2017), the world expo2020 taking place in Dubai will also place
some attention on the housing market expected to show a heightened source of business activity.
Developers have completed most of the work related the specific developments of Expo 2020.
There are some high profile initiatives undertaken in the housing sector as well (Jaunceyand
Nadkarni 2014).

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Summary
The housing market of UAE though not stagnant but is moving at a slower pace that has
resulted in slower growth rate as expected. The expo2020 conducted in Dubai is expected to
initiate certain developments in the housing sector thereby resulting in its rapid growth.

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References:
Barthel, P.A. and Vignal, L., 2014. Arab Mediterranean Megaprojects after the'Spring': Business
as Usual or a New Beginning?. Built Environment, 40(1), pp.52-71.
El Mallakh, R., 2014. The Economic Development of the United Arab Emirates (RLE Economy
of Middle East) (Vol. 13). Routledge.
Hamdan, L.2017. Cityscape 2017: Dubai's resilient property market continues to attract
investment.[online] ArabianBusiness.com. Available at:
http://www.arabianbusiness.com/interviews/property/378194-cityscape-2017-dubais-resilient-
property-market-continues-to-attract-investment [Accessed 20 Jan. 2018].
Hatemi-J, A., Roca, E. and Al-Shayeb, A., 2014. How integrated are real estate markets with the
world market? Evidence from case-wise bootstrap analysis. Economic Modelling, 37, pp.137-
142.
Jauncey, S. and Nadkarni, S., 2014. Expo 2020: What must Dubai’s hospitality and tourism
industry do to be ready pre-and post-event?. Worldwide Hospitality and Tourism Themes, 6(4),
pp.381-386.
Jll-mena.com 2016. Dubai Real Estate Market Overview. [online] Jll-mena.com. Available at:
http://www.jll-mena.com/mena/en-gb/Research/JLL%20Real%20Estate%20Market
%20Overview%20-%20Dubai%20-%20Q3%202016.pdf?7a100ae2-a51c-485d-be83-
875d44db0f4e [Accessed 20 Jan. 2018].

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Saied Al Surf, M., Trigunarsyah, B. and Susilawati, C., 2013. Saudi Arabia's sustainable housing
limitations: the experts’ views. Smart and Sustainable Built Environment, 2(3), pp.251-271.
Sfakianakis, J., 2014. Oil Prices and the GCC: The resilient and the Less So. Ashmore-The
Emerging View.
Yousafzai, K. 2017. How Expo 2020 will boost Dubai's property market. [online]
Khaleejtimes.com. Available at: https://www.khaleejtimes.com/business/real-estate/how-expo-
2020-will-boost-dubais-property-market [Accessed 20 Jan. 2018].
Zahlan, R.S., 2016. The Making of the Modern Gulf States: Kuwait, Bahrain, Qatar, the United
Arab Emirates and Oman(Vol. 10). Routledge.