UAE's emphasis on real estate sector is bearing fruit

UAE’s emphasis on real estate sector is bearing fruit

Following on the heels of a strong recovery from the COVID-19 pandemic, the UAE’s real estate sector is experiencing rapid growth. According to UK-based consultant Knight Frank, Dubai and Abu Dhabi are set to see the residential market expand at the fastest rate since 2015⁽¹⁾.

As 2022 begins, a variety of factors, including an enhanced regulatory framework in how the nation’s banks are exposed to the real estate sector, new stimulus packages, and a rise in rental rates, are set to provide tailwinds for growth. Below is a detailed exploration of factors expected to drive growth in the UAE’s real estate sector in 2022.

Vaccination programs and economic reforms

In early July of 2021, the UAE passed Seychelles as the world’s most vaccinated nation⁽²⁾. While variants of the novel coronavirus are causing new, limited shut-downs and restrictions worldwide, the success of vaccination programs, coupled with new government incentives, is leading to an increase in home and property purchases. A variety of economic incentives have recently become available to residents living and working in the region. These include a residency permit option for retired individuals, expansion of the 10-year golden visa program, and incentives for remote workers.

The incentives and programs, as well as continued recovery from the oil price slump that began in 2014, means that more families and individuals are now looking to upgrade to new and larger homes, searching for unique amenities like outdoor living spaces. Most of them are first-time buyers. So, in November 2021 alone, Dubai saw an 80 percent increase⁽³⁾ in property sales transactions from the previous year. With increased demand, property prices could rise in the next year.

The enhanced regulatory framework allows buyers to finance with confidence

At the end of 2021, the Central Bank of the UAE rolled out a new, enhanced regulatory framework⁽⁴⁾. These measures are designed to better supervise the nation’s banks’ exposure to the real estate sector. All balance-sheet loans and investments, as well as off-balance-sheet exposures, will be covered under the new regulatory framework.

These changes were several years in the making. A rise in bad loans from banks began around 2014 and has had an impact on lenders’ confidence in financing new home and property purchases. Now, the new measures will require banks to review and improve their own internal policies, which will lead to enhanced underwriting, risk management, and valuation. Greater oversight could lead to more confidence in the market. Banks will have one year from 31 December 2021 to fully enhance their internal practices in order to meet the new requirements.

Other real estate verticals are also seeing recovery

While residential real estate is set to see strong growth in 2022, other verticals are also not far behind. Office leasing and new builds⁽⁵⁾ are likely to begin across the country, especially in major cities and industrial areas. Globally, experts predict that tech sector building leases will lead the demand in the new year, with more companies leasing office spaces now more than in 2019.

All in all, the UAE government continues to remain steadfast in its commitment to unlock the real estate sector’s macroeconomic potential. Over the years, the sector has steadily increased its contribution to the national GDP, encouraging leaders to bank on it. In 2022, as the pandemic impact abates and new forces take shape, their efforts could translate to positive outcomes. If the sale numbers from November 2021, are anything to go by, the impact could manifest as early as the first quarter of 2022.

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