Coronavirus: UAE property market to receive shot-in-the-arm due to $27bn stimulus package, Savills Middle East says
Global real estate consultancy says comprehensive economic scheme in response to COVID-19 pandemic will contain impact
The UAE’s real estate sector has remained largely resilient during the first two months of 2020, and with the introduction of the $27 billion stimulus package, the property market will receive a shot in the arm in the medium-to-long term, a senior official from Savills Middle East has said.
In a statement from the global real estate consultancy, Richard Paul, the head of professional services and strategic consultancy for Savills Middle East, said that the comprehensive economic scheme announced by the UAE Central Bank is aimed at containing the impact of the coronavirus (COVID-19) outbreak.
“The exact impact of Covid-19 is unknown, but any disruption to the real estate markets is likely to be a near-term delay or a knee-jerk reaction rather than a fundamental downturn over the long term.
“There will be inevitable impacts on economic growth, tourism, high-street retail spends, and so forth but there are longer-term outtakes such as accelerating trends within flexible working, online retail and improving supply chain,” explained Paul.
As quoted in Savills’ real estate outlook following the official announcement of the package, Paul added that the strong fundamentals of the local economy, including foreign currency reserves of more than $110 billion and monetary measures introduced by the Central Bank will help weather any economic slowdown caused by the pandemic.
The outlook added that most of the companies across the UAE were successfully implementing remote working options for the majority of their staff, thereby ensuring business continuity and sustained economic momentum.
Murray Strang, the head of Dubai Office at Savills Middle East, said: “We have already witnessed a gradual increase in demand, especially across the residential sector in 2019 and a further relaxation in LTV ratios will encourage more investment appetite into the sector.”
“Banks will likely step up their exposure to real estate and the construction sector, a spike in re-mortgage activity may also be witnessed in the coming months due to attractive borrowing rates and other promotional discounts,” he added.
Murray Strang, the head of Dubai Office at Savills Middle East, said: “We have already witnessed a gradual increase in demand, especially across the residential sector in 2019 and a further relaxation in LTV ratios will encourage more investment appetite into the sector.”
“Banks will likely step up their exposure to real estate and the construction sector, a spike in re-mortgage activity may also be witnessed in the coming months due to attractive borrowing rates and other promotional discounts,” he added.
According to Savills, transaction activity by residents may also increase.
“A continued softening in asset pricing and completion of new projects over the next few months will offer value proposition to end-users to upgrade their current real estate to better quality stock,” stated Strang.
“However, there is a possibility that the market may witness a slowdown in demand from international investors due to restrictions in travel. At a corporate level, key decisions relating to fresh office space requirements may get delayed or postponed, which may in turn increase the number of renewal activities as a knock-on effect,” he added.
On the Abu Dhabi scenario, Savills said the emirate too has pitched in with a solid economic package for the businesses.
The Abu Dhabi Executive Council directed by Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces has also announced this week 16 new initiatives to support businesses and the community.
The fast-tracked #Ghadan21 initiatives to be implemented immediately will enable Abu Dhabi to adapt swiftly to both current and future challenges.
Edward Carnegy, the director-head of Abu Dhabi office at Savills Middle East, said: “The upfront financial requirement to buy property has reduced as individuals now have an additional 5% as part of the relaxed LTV norms.”
“The Abu Dhabi government has also waived off (for the entire year) real estate registration fee of two per cent. As a result, transaction activity by residents may increase as individuals who are currently renting will find it more affordable and lucrative to purchase their own property,” he added.
