Topic: Economic and Market Overview report

According to data provided by Jones Lank La Salled IP Incorporated (JLL) the economic growth of the UAE
slowed down significantly in 2015 due to a fall in oil prices which has resulted in a loss of revenue to both
the government and private sector. The slowdown of economic grown led to a fall in real GDP from 4.6%
in 2014 to 2.7% for 2015 with a similar level of growth forecast for 2016. Based on forecasts, it is expected
that oil prices will remain between $50 and $60 per barrel until 2020. (Jones Lang LaSalle IP, 2016)
To deal with the loss of revenue from oil prices, the UAE government is adjusting its budget to ensure
fiscal sustainability and avoiding long-term deficits by reducing spending and increasing government
revenue through taxes. This is expected to happen in the next 5 years with implications for the real estate
sector. Although the report by JLL has a positive outlook in the long term for the UAE development market,
it also anticipates that the rebalancing of the fiscal position of the UAE will result in headwinds and
challenges all over the next 12 months. Despite expected continuous spending on development and
infrastructure, it is expected that this level of spending will be reduced over the medium term. A reduction
in spending is necessary to realign with the reality of lower oil revenues. (Jones Lang LaSalle IP, 2016)
In 2011 a combination of factors, internal and external led to a fall in rental rates as well as very affordable
home prices. This was in response to the effects of the 2008 global financial crisis. Some of these factors
according to experts include a change in visa regulations which allowed owners of properties over DHS 1
million to have a 3-year residency visa, continuous low mortgage rates as banks were more liquid, buoyant
oil prices which supported the local economy and the announcement of some aviation companies to
expand and increase growth figures for tourism. On the external front, the Arab spring in some of the
Arab states shone a light on UAE as one of the safe havens for investment. In addition, the US budget
3
crisis, the European debt crisis, a slowing down of the BRICS economies and a threat of another recession,
a fall in the Indian rupee and Iranian Riyal also led to a fall in property prices. (Kapur, 2012)
The real estate industry in the UAE can categorized into 4 main categories namely office, residential, retail
and hotel.
The number residential units completed across the UAE in 2015 remained lower than in recent year with
just 7,800 residential units out of the forecasted 25,000 units in Dubai. Materialization rates have been
set to around 30%-50% in Dubai which is an indication that not all the proposed future supply for 2016
(26,000 units) will be delivered on schedule. A similar trend was observed in Abu Dhabi. (Jones Lang LaSalle
IP, 2016) The expected supply of residential units have been pushed to late 2016 and 2017 which have
been linked to lower sales levels, reduced government spending and the need amongst developers to
phase out supply Aly in line with demand to avoid an over supplied market. (Jones Lang LaSalle IP, 2016).
SWOT Analysis
Strengths Weaknesses
Company A is perceived to be an experienced and
qualitative developer as a result of well executed
projects in the Dubai.
There are no evident plans to embark on projects outside
Dubai into sectors and markets which seem to have
recorded favorable demand characteristics relative to
planned supply.
Company A owns a sizeable investment property
portfolio spread over various locations in Dubai.
Company A does not only make money from its real
estate properties but also through its subsidiaries
which are into different value-added services and
businesses.
A part of investment property portfolio owned by
Company A is located in Bur Dubai which is one of the
oldest parts of Dubai and requires refurbishment in order
to attract a certain group of potential residents.
Company A enjoys the backing of strong governmentowned financial institutions.
Opportunities Threats
Communities which are branded allow for the
capitalization on brands in regional markets and
home markets of the UAE expatriate community.
Considering the UAE government is planning to cut down
on spending in the next 5 years coupled with a seemingly
correction and stabilization of property prices in the
market, this could potentially hinder the appetite for new
developments.
High demand for contracting services as the UAE and
regional countries are experience a construction
explosion.
Low oil prices in the region which implies that a shortage
of revenue for infrastructure and real-estate development
could hinder expansion and further developments
Upcoming Expo 2020 which is expected to lead to an
increase in demand for home, office and hotel space
for visitors
Regional instability linked with terrorism can be seen
another major threat to companies operating in the region.

Pages: 8 Double spaced(2200 words)
Style and sources: MLA, 18 sources
Free extras: Outline/Title page/Bibliography / Reference page
Study level: Bachelor
Assignment type: Report
Subject: Accounting
Language: US

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