IMF expects ‘gradual recovery’ in Dubai property market from 2018

The International Monetary Fund (IMF) is expecting Dubai’s real estate market to gradually recover, in tandem with the overall economic growth projected for the emirate from next year, said Natalia Tamirisa, IMF Mission Chief to the United Arab Emirates.

Last week, the IMF said it expected Dubai’s growth to strengthen to about 3.3 percent in 2018.

Meanwhile, the UAE’s non-oil sector growth will increase to 2.8 percent next year, up from 1.9 percent in 2017.  

“Nobody knows exactly when the [real estate] market will bottom out, but we do expect that there will be this gradual recovery in line with the rest of the economy,” Tamirisa told Argaam in an exclusive interview.

One of the important factors supporting the growth of the sector is it being exempted from value-added tax (VAT), she said.  The UAE will start imposing 5 percent VAT from January 1, 2018.

“The real estate market is not subject to VAT… real estate investment is not subject to VAT... rents are not subject to VAT, and that would be a supporting factor, "Tamirisa said.

According to the UAE’s Federal Tax Authority (FTA), there will be zero percent VAT on the first sale/rent of residential building after completion of construction or conversion, with sale/rent of residential buildings subsequent to first supply, and bare land being fully exempt. 

However, sale and rent of commercial buildings (not residential buildings) and hotels, motels and serviced accommodation will be taxed at 5 percent, the FTA said.

Earlier this month, UK-based Knight Frank said prices of prime residential property in Dubai are likely to see a modest one percent rise in 2018, after a weak performance during the recent market cycle.

The consultancy added that the government's investment in the economy and infrastructure ahead of Expo 2020 Dubai will generate more employment opportunities, leading to higher housing demand.