Residency visa clarity to boost realty sector

Resolving issues linked to the residency status of expatriate property purchasers will provide a floor to the Dubai realty market, according to a new report."Measures such as a removal of the current link between employment and residency status, and a clarification of the law providing for residency for expatriate purchasers may be required to provide a floor to the market," Jones Lang LaSalle (JLL), a real estate advisory firm, said in a report titled "Dubai City Profile – A Review of the Dubai Property Market."The report expects activity in the residential sector to slow further in the first half of the year as nervous investor sentiment coupled with lower rental rates will encourage residents to lease rather than buy. As investors continue to adopt the "wait and see" approach, landlords are also becoming more flexible with payment terms, accepting cheques on a quarterly or even monthly basis. The government is taking various measures to try and alleviate the effect of the global financial crisis such as the rental cap has been replaced by a rent freeze. Rents can only be increased where they are significantly below the average as set out in Real Estate Regulatory Agency's recently launched index. According to JLL, the residential market is currently undergoing a price correction and rental yields have fallen from around nine per cent to six per cent over the past six months. Since the third quarter of 2008, asking prices for both villas and apartments have seen an average decrease of 10 per cent to 20 per cent, but prices of villas have declined by less than those of apartments due to their limited supply. "Given the absence of speculators and the inability of end users to raise finance, it is not surprising that transactional prices have declined even further over the past six months, with transaction prices typically 30 per cent to 50 per cent below asking prices." Rental rates registered an average increase of around 20 per cent for both villas and apartments in the third quarter, but decreased by four per cent to eight per cent in the fourth quarter. "We estimate that market-wide physical occupancy currently averages around 70 per cent for residential units that have been completed and handed over, although this figure is significantly lower in some projects."According to JLL, approximately 32,000 new residential units were completed in 2008, bringing the total residential stock across to around 253,000. The majority of completions were in projects such as Discovery Gardens, International City and the Marina Promenade.