The introduction of value added tax (VAT) will bring volatility and uncertainty to the UAE’s property sector, which is expected to continue to decline in 2018 amid increased supply in some segments of the market, according to broker JLL Mena.
The five per cent levy, introduced on January 1, does not apply to residential rents and first supply of new homes, but is already adding pressure to an already subdued property market, which suffered declines last year.
“The UAE real estate industry is entering into a transitional phase, with VAT now in effect and key stakeholders seeking to decipher its immediate and longer term impact,” said Craig Plumb, Head of Research at JLL MENA.
“Although VAT does not apply to residential rents and sales of new residential property, other real estate sectors could be negatively impacted by increased costs and cash flow challenges.”
Weak economic growth, jobs cuts, lower housing allowances and increase in supply hit the UAE’s property sector last year as both rents and prices continued to slide in some segments of the market.
In Dubai, apartment prices in the fourth quarter dropped 4.2 per cent year-on-year, while villa prices dipped 2.4 per cent year-on-year, according to JLL. Declines were steeper in Abu Dhabi, with apartment prices plummeting 14 per cent year on year in the fourth quarter and villa prices plunging 12 per cent year-on-year.
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Dubai real estate sector to soften further in 2018, says Core Savills
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Nevertheless, off-plan residential sales in Dubai rose to their highest level in 2017 since the 2008 financial crisis, with their share of total transactions rising to 60 per cent in 2017 from 10 per cent in 2010 thanks to attractive payment plans by developers. A total of 25,600 off plan properties were bought in 2017, compared with more than 34,800 sales recorded in 2008.
The UAE government introduced VAT this year as part of plans of shoring dwindling government income from oil. The levy is creating complications in some sectors in its early days of implementation, including real estate.
“One of the main complications for the construction sector will be the treatment of goods delivered after 1 January 2018 where prices have already been fixed,” said JLL. “The main concern for contractors will be the impact of VAT on cash flows, which could lead to a downward revision in payment times in construction contracts.”
An expected oversupply in the property market is another concern in 2018. In Dubai, around 570,000 units of new supply could enter the market by 2020, representing an average annual increase of 8 per cent, according to JLL.
“The recent activity in the [Dubai residential] market suggests that confidence has returned to both investors and developers, however it is worth noting that the number of new launches are significantly below their peak levels in 2006/2007 and the volume and the value of sales are also below levels recorded during 2013/2014,” the report said.
“As the market absorbs additional units, it is expected that prices will continue adjusting (downwards) with occupancy levels following a similar trend as supply growth outpaces potential demand.”
The specs: 2018 Infiniti QX80
Price: base / as tested: Dh335,000
Engine: 5.6-litre V8
Gearbox: Seven-speed automatic
Power: 400hp @ 5,800rpm
Torque: 560Nm @ 4,000rpm
Fuel economy, combined: 12.1L / 100km
Score
Third Test, Day 2
New Zealand 274
Pakistan 139-3 (61 ov)
Pakistan trail by 135 runs with 7 wickets remaining in the innings
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
2025 Fifa Club World Cup groups
Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.
Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
Group D: Flamengo, ES Tunis, Chelsea, Leon.
Group E: River Plate, Urawa, Monterrey, Inter Milan.
Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
Group G: Manchester City, Wydad, Al Ain, Juventus.
Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.
The alternatives
• Founded in 2014, Telr is a payment aggregator and gateway with an office in Silicon Oasis. It’s e-commerce entry plan costs Dh349 monthly (plus VAT). QR codes direct customers to an online payment page and merchants can generate payments through messaging apps.
• Business Bay’s Pallapay claims 40,000-plus active merchants who can invoice customers and receive payment by card. Fees range from 1.99 per cent plus Dh1 per transaction depending on payment method and location, such as online or via UAE mobile.
• Tap started in May 2013 in Kuwait, allowing Middle East businesses to bill, accept, receive and make payments online “easier, faster and smoother” via goSell and goCollect. It supports more than 10,000 merchants. Monthly fees range from US$65-100, plus card charges of 2.75-3.75 per cent and Dh1.2 per sale.
• 2checkout’s “all-in-one payment gateway and merchant account” accepts payments in 200-plus markets for 2.4-3.9 per cent, plus a Dh1.2-Dh1.8 currency conversion charge. The US provider processes online shop and mobile transactions and has 17,000-plus active digital commerce users.
• PayPal is probably the best-known online goods payment method - usually used for eBay purchases - but can be used to receive funds, providing everyone’s signed up. Costs from 2.9 per cent plus Dh1.2 per transaction.
CREW
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HOW TO WATCH
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COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
IF YOU GO
The flights
FlyDubai flies direct from Dubai to Skopje in five hours from Dh1,314 return including taxes. Hourly buses from Skopje to Ohrid take three hours.
The tours
English-speaking guided tours of Ohrid town and the surrounding area are organised by Cultura 365; these cost €90 (Dh386) for a one-day trip including driver and guide and €100 a day (Dh429) for two people.
The hotels
Villa St Sofija in the old town of Ohrid, twin room from $54 (Dh198) a night.
St Naum Monastery, on the lake 30km south of Ohrid town, has updated its pilgrims' quarters into a modern 3-star hotel, with rooms overlooking the monastery courtyard and lake. Double room from $60 (Dh 220) a night.
The bio
Who inspires you?
I am in awe of the remarkable women in the Arab region, both big and small, pushing boundaries and becoming role models for generations. Emily Nasrallah was a writer, journalist, teacher and women’s rights activist
How do you relax?
Yoga relaxes me and helps me relieve tension, especially now when we’re practically chained to laptops and desks. I enjoy learning more about music and the history of famous music bands and genres.
What is favourite book?
The Perks of Being a Wallflower - I think I've read it more than 7 times
What is your favourite Arabic film?
Hala2 Lawen (Translation: Where Do We Go Now?) by Nadine Labaki
What is favourite English film?
Mamma Mia
Best piece of advice to someone looking for a career at Google?
If you’re interested in a career at Google, deep dive into the different career paths and pinpoint the space you want to join. When you know your space, you’re likely to identify the skills you need to develop.
Company%20Profile
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The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
