Emirates of Ras al-Khaimah, Fujairah, Umm al-Quwain and Ajman pose opportunities for developers and construction companies
Property prices in the Northern Emirates are being boosted by soaring rents in Dubai as tenants seek more affordable housing, developers and analysts say.
The emirates of Ras al-Khaimah, Fujairah, Umm al-Quwain and Ajman pose opportunities for developers and construction companies following double-digit price rises in Dubai.
Ras al-Khaimah (RAK) has already seen an increase in real-estate prices following a resurgence in the Dubai market, according to Barry Ebrahimy, Head of Commercial at Al Hamra Real Estate Development.
Dubai “market conditions have had a positive impact on the real estate market in RAK,” says Ebrahimy. “As the prices increase in Dubai, investors have looked closely at options available in the other emirates.”
According to a recent report by Cluttons, house prices in Dubai’s freehold areas increased 51% last year.
Despite the growth rate having slowed in 2014, according to Cluttons, high rental costs are still pushing residents to seek cheaper options, analysts say.
The boom in Dubai is likely to see people to seek “more cost-friendly locations,” says Matthew Green, head of research and consultancy at CB Richard Ellis.
Rehan Akbar, a Dubai-based analyst in Moody’s Corporate Finance Group, said this can “justify the need for further developments in the neighbouring emirates.”
“Higher rental costs in Dubai have already forced some tenants to relocate to Sharjah and now further afield to Ajman,” says Akbar.
The Expo 2020 event set to be held in Dubai is sure to have a positive effect on construction and development in the Northern Emirates, Green notes, as the event bodes well for the entire country.
Developments in the Northern Emirates, however, are understandably not as large-scale as the rest of the country.
“The volumes are much smaller compared to Dubai and Abu Dhabi,” says Christopher Seymour, partner at EC Harris. “And that’s true in terms of GDP, their overall economy, but also the development opportunities.”
Fujairah, Umm al-Quwain lag behind
Seymour said there is still interest among developers to expand to the Northern Emirates. But the scale of development so far has not been uniform.
Fujairah’s development has not been as rapid as Ras Al Khaimah, Green says. “Things have moved pretty slowly,” he adds.
“There’s definitely opportunities in Fujairah,” Seymour says. “From what we see, RAK is probably ahead, but it is reasonably balanced.”
The market in Umm Al Quwain (UAQ), on the other hand, has been relatively slow, analysts say.
“There isn’t a lot in UAQ,” Green notes, adding that the emirate probably has the “least activity going on there.”
Emaar, however, have a development called UAQ Marina located in the emirate. The Dubai-based developer declined to comment when contacted by Big Project ME.
Challenges lie ahead
Despite the upcoming projects underway, developers still face challenges when looking to expand in the Northern Emirates, commentators say.
“As the transparency in Dubai and Abu Dhabi have improved again the northern Emirates are following,” Seymour notes. “Even so, as in Dubai and Abu Dhabi, the numbers are hard to get a hold of.”
This could lead to “difficulty for agencies trying to predict where development will happen,” he says.
While roads to the northern Emirates have improved, obstacles still exist in terms of supply chain and logistics, Seymour adds. “For developers… the supply chain is not as sophisticated as in Dubai and Abu Dhabi. The logistics are slightly harder.”
“These obstacles are not the end of the road,” Seymour says. “It is not a barrier. It is more of a challenge to overcome.”