Dubai’s residential property market, which has recently witnessed a flood in demand from investors and first-time purchasers, is required to keep on confronting pressure this year, as indicated by new analysis.
The cost of apartments, villas, and townhouses all over Dubai and Abu Dhabi fell in 2020, mainly due to a decline in demand caused by the coronavirus pandemic.
The size of the population in both emirates is approximated to have declined by 5 percent in the previous year as expatriates hit by job losses gained to return to their home countries. “While population growth is expected to return in 2021, it will likely not be at least until late 2022 before we see population levels return to their pre-pandemic levels,” said Knight Frank in a report released on Tuesday.
“In Dubai, this lower level of demand will be further compounded by a continuing influx of supply, which in turn is likely to continue to put pressure on property values,” it added.
Dubai is estimated to witness the delivery of more than 41,000 new apartments and villas this year, more than the finished units in 2020, as per Asteco. In Abu Dhabi, new supply could touch the line of more than 7,000 units, based on the estimates provided by real-estate consultancy CORE.
HIGH DEMAND
Developers, real estate brokers, and government data have actively shown a strengthening of demand for residential properties, with some recently launched units selling out in no time.
Dubai’s biggest listed developer, Emaar Properties, said that it generated more than 6 billion dirhams ($1.6 billion) in deals during the initial three months of 2021, whereas in Abu Dhabi, Aldar Properties provided the freehold villas and townhouses in its new project in Yas Island were sold out within 48 hours.
As of the first quarter of 2021, the ValuStrat Price Index provided a total 10.9 percent annual fall in capital values. Quarterly figures, however, showed an improvement of 0.8 percent.
As per Haider Tuaima, the head of real-estate research at ValuStrat, capital values in all build freehold villa places have gained since the last quarter, ranging from 1.8% to 5.4%. However, the trend is not over the board. “Only half of the apartment locations improved in value. Some areas saw declines of up to 2.8 percent,” he told Zawya.
In terms of the transaction, the first quarter of 2021 witnessed the highest registered number of home deals since 2010, with transactions of more than 6,000 ready homes costing a total of 13.5 billion dirhams and 3,600 off-plan properties costing a whole of 5 billion dirhams.
INCREASE IN PRICES
With the strong demand for certain types of properties, mainly ready-to-occupy units, costs in some communities have raise. As per the real-estate brokerage firm Allsopp & Allsopp, average deal costs have raised by 31 percent from 2.2 million dirhams in 2020 to 2.9 million dirhams in 2021.
When questioned about what could be behind the trend, Tuaimo noticed that some buyers are seeking sought-after properties with offers higher than the original asking costs.
Altogether, current property costs are still lower than they were before the coronavirus pandemic.
“In the UAE, despite various fiscal initiatives enacted on an emirate level and a wide-ranging federal monetary stimulus package, property values in most parts have seen material declines,” said Taimur Khan, the head of research at Knight Frank Middle East.
“This not the case in all segments. The pandemic has, in certain real-estate asset classes, accelerated pre-pandemic shifts in demand, for example, from physical retail to e-commerce, which in turn has helped underpin values in the industrial sector.”
Among those that have seen the most noteworthy effect is the UAE’s hospitality area, which saw esteems decrease fundamentally. Values in industrial properties seem to have reached as far down as possible, and in 2021, they are probably going to stay stable on average.
Within the retail segment, values in Abu Dhabi are anticipated to remain static this year because of significant levels of forthcoming supply, as per Knight Frank.