Here at Holborn Assets we recently posted our thoughts on the outlook for the commercial property market in the UAE, and it’s fair to say that the prognosis – in the short term at least – was that the market is set to remain flat at best. We pointed to a number of reasons for believing this, research from the UK’s Royal Institution of Chartered Surveyors (RICS), which shows a sustained fall in demand in the commercial property market, predictions of falling rental revenue through 2018 and declining interest from foreign investors.

That then is our take on the outlook for the commercial property sector in the Emirates. But what about the wider property market in the UAE as a whole? Is the bigger picture as unpromising as the one we have painted for commercial alone?

The Expo effect

Well, we’d say that to a large extent, it isn’t. One of the biggest factors that we think will play an important role in boosting the fortunes of the UAE property market – both commercial and residential – is Expo 2020, taking place in Dubai. The event is set to be a real boost economically, and we’re predicting it will drive prices – and demand – up as it gets nearer. One local property entrepreneur – Muhammad Binghatti, CEO of Binghatti Developers – suggests it will be part of a generally more positive upturn in the market. “As we get closer to Expo 2020, it will create more jobs and more people will come in for investment. In addition to Dubai being a safe haven in the region, it is always a magnet for investments. We’ll see improvement next year in terms of demand and prices,” he said. “It is always encouraging when supply comes from big developers such as Emaar, Dubai Properties and Nakheel, as it reflects the trend and direction of the market.”

Low rents set to continue

As a counter to the Expo effect, however, we’re also predicting that rents – particularly on the residential side – will continue to head south. Dubai in particular is looking to add another 20,000 new residential units in 2018, and that will only have a dampening effect on what landlords and investors will be able to charge. That’s good news for commercial and residential tenants of course, who will be able to save on their outgoings each month, but it provides a challenge for landlords and investors. An ongoing low oil price and a slow global economic recovery are also set to continue to have a negative effect on the UAE economy as a whole.

Positive signs

It’s not all bad news though. As well as the boost from Expo 2020, it’s worth noting that not all of the factors that are currently having a negative effect on the commercial property sector apply to the residential sector too. For example, the recent introduction of VAT does not apply to residential properties, and so the dampening effect of this legislation on property owners doesn’t apply there. On the commercial side, VAT is an extra cost that landlords and investors are currently struggling to pass on to their tenants because the market is so flat – but again this isn’t a factor for residential landlords and investors.

Ultimately then, it’s a mixed picture for the UAE market in 2018. For renters, now could be the ideal opportunity to shop around for the best rates. As property expert Jesse Downs of Phidar Advisory told Gulf News recently: “It could present a good time to move within the next year. Tenants are moving to new buildings with better quality and better price.” We’d agree with this – but also suggest that there are enough positive factors in the overall property picture to suggest that things may soon start to get better for investors and landlords too.