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Sick UAE property market seen propped up by longer visas
[DUBAI] As homebuilders in Dubai and Abu Dhabi think up extravagant incentives to shake the property market out of its long slumber, the government will offer potential buyers something the companies can’t: the right to stick around.
A decision to extend visas to 10 years for some professionals is seen as a boon for a foreigner-dependent United Arab Emirates property industry that’s been in the doldrums longer than anyone had expected.
“The landmark visa changes are undoubtedly going to go some way in helping to stimulate demand for both residential and commercial property,” said Faisal Durrani, global head of research at property broker Cluttons. “The property markets across the UAE have been dogged by challenges ever since oil prices collapsed nearly four years ago, ranging from the threat of oversupply, to the lack of affordable housing.”
The extension announced by UAE Prime Minister and ruler of Dubai Sheikh Mohammed Bin Rashid on Sunday is part of a package of measures approved by the cabinet to stimulate the economy. The rules are expected to come into force this year and visas lasting as long as a decade will be offered to specialists in medical, scientific, research and technical fields and top students. The country is also is abandoning decades of restrictions on foreigners owning companies.
Shares in several property companies in the country jumped on the news. Dubai-based developers Emaar Properties PSJC and Damac Properties Dubai Co climbed for a second day on Tuesday after gaining 2.9 per cent and 4.8 per cent respectively on Monday. Abu Dhabi’s Aldar Properties PJSC was unchanged over the two days.
Dubai’s property market has become more oriented toward local residents after a bubble fuelled by foreign speculators brought the country to the brink of financial collapse in 2009. That prompted the government and the UAE central bank to take steps to restrict the highly leveraged purchases and property flipping that had fueled price increases. As a result, the longer-term security of foreign residents has become a more important factor in finding willing buyers.
Home prices have been steadily falling in both Dubai and Abu Dhabi, defying widespread predictions of a rebound in 2017. That has led developers to offer incentives ranging from luxury cars to an apartment thrown in with the price of a villa.
The decline has also prompted real estate developers in the country to seek the benefits of scale though acquiring assets from other property companies or cooperating on projects. Abu Dhabi’s Aldar Properties bought US$1 billion of real estate assets from Tourism Development & Investment Co earlier this month, while Emaar, the Dubai-based developer of the world’s tallest tower, and Aldar in March agreed on a partnership to develop 30 billion dirhams (S$11 billion) of real estate projects in the UAE and abroad.
Prices across Abu Dhabi fell 7 per cent last year, according to Cluttons. The picture in Dubai hasn’t been much better. The value of real estate sales in the first quarter was 18.8 billion dirhams, about half of what it achieved in the same period a year earlier, according to data from the Dubai Land Department.
“This is a positive boost to the UAE property market and will have an upward impact on sales prices and rentals which will please investors across the emirates,” Giles Hannah, head of international residential at Dubai Properties, part of Dubai Holding LLC, said of the visa decision.
While the visa move is seen as a step in the right direction, it falls short of giving the security of permanent residency, which would go further to encouraging expatriates to buy property.
“The next bold step in this march of progress will be to offer expats not full fledged citizenship, but a permanent sense of belonging, perhaps through permanent residency permits,” said Mr Durrani.