The commercial real estate market in the United Arab Emirates has been rebounding and showing great signs of recovery, according to a recent quarter survey by the Royal Institution of Chartered Surveyors (RICS). Due to increased foreign investment and interest in the sector, the region's growth has accelerated.
In April 2013, it was reported that the U.A.E market was gaining traction on the growth of Dubai and Abu Dhabi. Not much has changed since then. The two cities have been major contributors to the real estate recovery.
Dubai recorded a total of 30,469 transactions from the start of 2013 to June. For the month of July alone, the city recorded transactions worth $14.4 billion, reports MENAFN.com.
According to the survey, U.A.E's commercial property market has occupied the first position on the RICS Occupier Sentiment Index (OSI) and the second place in its Investment Sentiment Index (ISI). While the OSI is calculated by taking an average of three series of rent expectations, occupier demand and the level of inducements in the market, the ISI is measured weighing a three series average of capital value expectations, investment enquiries and supply of distressed properties.
Apparently, the occupier demand in the market went up to a reading of 73 in the second quarter of 2013 from 43 in the previous quarter. Vacancy rates also dropped to 44 from 66 on a quarter on quarter basis. Investor enquiries rose to reach a reading of 54 for quarter two. Supply of distressed property is forecast to drop in the coming three months as well.
About 33 per cent of the surveyed respondents said that new developments started in the second quarter. Also, 51 per cent believed that capital values of properties will increase over the next quarter.
The increased faith in the property market is proof of the steady growth of the sector.
"Further improvements in sentiment in both the occupier and investment segments of UAE real estate market show that the tone in the property industry is continuing to gain ground, reversing the negative pattern that characterised the market from the back end of 2009 through till the middle of last year," according to a feature on Emirates 24/7.
Read the capsuled survey, here.
The immense growth has however given rise to significant concerns of a looming real estate bubble. More recently, the International Monetary Fund (IMF) said in its Article IV consultation of U.A.E that the market had grown 16 per cent within four months, ending April. CBRE, a real estate intelligence firm also reported that rents went up 30 per cent in the country. This has induced some worries among experts.
"It's too early to speak of a bubble now, but if prices increase at this pace, over time there's certainly a risk that there would be a new bubble forming up," Harald Finger, the IMF's mission chief to the U.A.E., said during a conference call to the Wall Street Journal.
Some Dubai officials have, however, reassured that a market crash like the one that happened four years ago is unlikely as the region has learnt its lesson. Some major projects in Dubai will be built "gradually over the medium and long term" thus controlling the heat in the market, reports the Journal.
