Project delays ‘blessing in disguise’ for UAE real estate – JLL
Delays will reduce the risk of oversupply in 2016, consultancy says
Project delays caused by slowing market conditions are likely to reduce the risk of oversupply in the UAE real estate market in 2016, according to JLL.
Delays in projects expected this year will stem from factors like financial issues, contractual disputes, construction delays, and licensing or approval delays. Some developers are expected to deliberately hold back completions to avoid flooding the market, the real estate consultancy said.
Such delays will be a “blessing in disguise”, helping stabilise the property market by avoiding excessive supply, it noted.
“Over the past five years, the materialisation rate of proposed projects has been relatively low, with only 30% for proposed residential projects and 45% of proposed office space completing on schedule,” JLL said in a statement.
The materialisation rate is expected to remain low this year with further project delays in the pipeline.
“2016 is expected to see more challenging conditions in the UAE real estate market as we begin to feel the impact of the continuing fall in oil prices and ongoing geopolitical tensions leading to reduced liquidity, and pressure on government budgets,” remarked JLL MENA CEO Alan Robertson.
Although the liquidity crunch will impact the UAE and wider GCC, the real estate sector in the UAE is now better equipped to deal with tough market conditions.
“2016 is likely to be a more challenging year for the UAE real estate market than 2015, but it must be recognised that the overall economy is still expected to grow at around 2.7%, so there remains opportunities as well as challenges.”
Given the low oil price scenario, the government will have less scope to inject liquidity into the financial system, which will impact real estate investment this year, the consultancy said. Conventional project financing such as bank lending and IPOs is forecast to become more difficult, leading developers to look for alternative funding mechanisms such as joint ventures, refinancing, and public-private partnerships (PPPs).
