It is never easy to make detailed predictions about property markets – but what we thought we’d do here is to try and give you our thoughts on the way the UAE property sector is shaping up as we move through 2018. In particular, we’ll try and give you some pointers towards which sectors and areas might be worth keeping an eye on, in terms of the potential they’re showing for investors to see healthy returns.

The big picture

Firstly, a quick overview of the current property market in the UAE. It appears that the market is now entering a period of ‘maturation’ – as prices, rents and yields all declined slightly last year. According to a recent report by Property Monitor Index, the average apartment, villa and house prices fell by around 2 per cent last year. On the rental side, the report suggests that residential rents also headed downwards, at around 4 per cent.

All of this meant lower yields for property investors across most areas in the UAE, and we’d expect these lower yields to continue through 2018. Why? Well, analysts at Core Savills point to a number of factors that could contribute to this in another report published recently: “Further rental declines, the ongoing strength of the US dollar and the imminent, albeit probably limited, inflationary effects of the introduction of VAT in the emirates are all expected to compress investment yields.”

Opportunities for investors

So does this all add up to a poor outlook for those investors looking to put their money into property in the UAE? Here at Holborn Assets, we’d suggest not. Part of this confidence again comes down to this idea of a ‘maturing market’. A relatively low level of supply – around 20,000 new residential units in 2017, and another 80,000 units to be delivered in 2018 – has put something of a brake on the price drops – but has also increased the amount of competition between developers, something that we think is certainly good for investors looking for a better quality of property.

Areas of interest

There are a few areas that are also going to be well worth keeping an eye on, given their performance last year. Jumeirah Village Circle and Dubai South both recorded the highest number of off-plan transactions in 2017, and offer real opportunities for investors looking for growth potential and strong yields in 2018. Last year, Jumeirah Village Circle led the way with gross rental yields of 9.2%, followed by Discovery Gardens at 8.9%, and International City at 8.6%. Jebel Ali and Dubai Creek Harbour also look increasingly attractive areas to investors.

Of course, the outlook varies from sector to sector – and we’ve talked here before about the decline in prices for the luxury end of the residential market – a knock-on effect of the travails of the oil industry, with yield for this sector down 11.2 per cent in 2017. The analysts at Core Savills are expecting this trend to slow in the coming year however – here’s what their CEO David Godchaux has to say: “In the near-term we expect prices to continue stabilising in the prime and upper mid-market segment while the current decline in rents is anticipated to decelerate, allowing yield compression to slow down.”

Affordability matters

We’d suggest however that investors should certainly keep an eye on the more affordable and lower mid-market segment of the UAE property market as we head deeper into 2018. These sectors have seen a smaller decline in yield for investors over recent years – around half of that of the top end of the market – and we’ve also seen sales of smaller properties rise by around 24 per cent in the last year or so according to a recent report by Dubai property experts dubizzle Property.

So, as ever, it’s a case of keeping a close watch on a fascinating market, that is showing real signs – in some sectors at least – of being able to deliver some solid returns for investors.