The near term looks set to bring more of the same, with ground expected to be broken on several large-scale residential developments next year. Sales transactions in Sharjah rose 46% y-o-y for the period January to June, according to the department’s figures, which were released in mid-August. The number of residential properties sold reached 1289, up 23%, while sales of commercial properties totalled 846, marking an increase of 109%.
While the overall value of property sales slipped by 3% to Dh11.7bn ($3.2bn) y-o-y, the drop was attributed more to the rise in the number of medium-range and affordable residential units entering the market than any downward movement in prices.
Real estate reforms contribute to strong sales Purchases have been fuelled, in part, by changes made to Sharjah’s property regulations in 2014 allowing foreigners to buy real estate in designated areas under a 100-year leasehold. Before the reforms, only UAE nationals, citizens of other GCC states and Arab nationals with residence status in the country were allowed to buy property in Sharjah.
High supply weighs on rental returns
When it came to the rental sector, increases in stock pushed down broader rental costs in the first six months of 2017, according to a report issued in September by property consultancy Cluttons, although the luxury segment performed strongly.
The report, titled United Arab Emirates Property Report 2017, showed that returns on rental properties in the villa segment rose 11.7% y-o-y on the back of growing appetite for high-end residences.
Rents on apartments, however, fell by 7% between January and end-June, having already slipped 8.1% in 2016. Lower rental returns in Sharjah part of regional trend
In neighbouring Dubai, more than 55,000 units are expected to enter the residential property market before the end of the decade. This influx, combined with current oversupply, risks putting rental pricing under pressure as owners look to attract tenants. Any reduction in prices in Dubai could increase its appeal as a rental destination and heighten competition with Sharjah, which has historically benefitted from lower rental costs.
Rents in Dubai’s residential segment fell an average of 1.5% in the second quarter of 2017, according to Cluttons’ findings, marking a 12th consecutive quarter of falling rents, with the decline averaging 14% across the market. Competitive cost of living benefits emirate
Despite falls in both property prices and rentals in Dubai, Sharjah still has an edge over its neighbour in terms of affordability. Its cheaper cost of living could help the emirate maintain competitiveness in the residential market, especially among locals and expatriates in the middle-income bracket.
Sharjah ranked 302nd out of 511 cities surveyed for their cost of living in a mid-year affordability report compiled by Numbeo, down from 273 in the researcher’s last survey, which was carried out in January. Dubai also slipped from 190th spot to 206th, widening the gap between the two emirates over the first six months of the year.
According to George Khouzami, COO of Sharjah-based real estate company Al Thuriah Group, another attraction is that buyers can secure more space for their money. “Real estate in Sharjah remains a predominantly price and size-driven market, so although the development of new housing projects on the outskirts of Dubai may provide a supply of more affordable accommodation which could compete with Sharjah and provide sufficient space for price-conscious families, properties in Sharjah will remain attractive due to the space offered,” he told OBG. Substantial pipeline of new projects
The sector’s continuing strong performance has led developers to announce a new round of real estate projects.
Al Thuriah Properties announced plans in late September to commence work on a new high-rise building as part of its Sahara Tower 6 development after achieving 80% sales while the project was only 50% complete.
Construction on the second building is expected to get under way next year and finish in late 2019, with both towers adding a total of 376 apartments to existing supply.
In the same month Arada unveiled a $6.5bn project that will offer housing for 70,000 people, along with commercial, entertainment, retail and community facilities. The venture marks Sharjah’s largest real estate development to date.
Scheduled to break ground in the first quarter of 2018, the Aljada initiative will cover an area of 2.2 sq km located near Sharjah’s University City and the emirate’s international airport. Completion is slated for 2025.
The latest wave of planned projects reflects the emergence in Sharjah’s real estate sector of large, mixed-use developments, which look set to bring more mid- to-high-end properties onto the market.
Though these and other developments will boost residential stocks, factors such as pricing and cost of living are expected to help the emirate retain its competitiveness. This, coupled with broader economic expansion should help the sector maintain a balance between supply and demand, underpinning strong returns on investments.
© Oxford Business Group 2017