Dubai’s realty sector, which caused a flow in the supply of residential units year by year in 2020 nevertheless of the road blocked by the pandemic, is predicted to add 39,000 units in 2021.
In the previous year, the market witnessed the delivery of around 36,000 units, which causes an increase in the number of units that were added to the market last year, and also according to the data delivered by real estate consultancy Core.
As per Asteco’s data 2019 saw a total of 31,000 residential units introduced into the market in Dubai, which will contain approximately 23,600 apartments and 7,400 villas. As per Data Finder, a total amount of 32,822 residential units in the freehold and non-freehold communities were delivered in Dubai in the starting nine months of 2019 and about 13,216 units have to be completed at the end of 2019 or Q1 2020.
As per the research analysts at Core “We conservatively forecast nearly 39,000 units for 2021, however, further revisions are expected as forecasts will inherently depend on buyer confidence and an uptick in market sentiment as developers continue to adjust to ongoing market conditions”.
In 2021, sales prices and rents to stay under downward pressure with the apartment districts which are predicted to face further headwinds whereas the established villas which were proving for strong take-up over H2 2020 and now have limited supply are predicted to see price resilience, said the report.
Prathyusha Gurrapu, head of Research and Advisory at CORE, said “while disrupting the real estate market, the pandemic has also accelerated reforms. Measures to curb supply are gradually showing effect with major stakeholders collectively addressing Dubai’s oversupply.”
“Government-led demand drivers including a range of visa reforms, low-interest rates, and attractive LTV (loan-to-value) ratios for first-time buyers are supporting and sustaining demand. These steps have also resulted in a slowdown in the off-plan market and relative resilience in the secondary market with record transaction volumes seen, largely led by end-user buyers,” said Gurrapu.
This year, secondary sales transactions are predicted to be static as underlying demand is supported by the lower capital values and demand drivers such as financial, visa, and social reforms. “ We expect new launch volumes to further reduce in 2021 as developers re-strategize and focus on the absorption of existing inventory.”
Gurrapu said although the impact of Covid-19 has pushed price recovery further ahead, the market has started to witness resilience in sales prices as values reach development costs in many districts. “Villa districts have particularly fared well due to rising demand from occupiers requiring more space and open areas as they adjusted to changes in working arrangements. However, apartment districts maintain their downward trajectory and are yet to show signs of plateauing,” said Gurrapu.
Gurrapu informed rather than the impact of Covid -19 has pushed price recovery to further next time, the market has started to eyewitness resilience in sales costs as the values are reaching the development costs in many districts. He also added “Villa districts have particularly fared well due to rising demand from occupiers requiring more space and open areas as they adjusted to changes in working arrangements. However, apartment districts maintain their downward trajectory and are yet to show signs of plateauing”.
The core report informs that rather than the challenging 2020 we all had gone through, the secondary market transaction marks saw a rise of 7.0 percent over 2019 volumes. “Significantly lower buying costs and a raft of government-led demand drivers are the biggest factors currently supporting transaction activity. In fact, after the initial slump in April and May 2020 due to movement restrictions, December witnessed the highest monthly transaction volumes in two years.”
However, offplan market activity squished significantly by about 32 percent one after another year in 2020 as the clients would want to buy the ready units in order to avoid further problems and it is also predicted that this will continue in 2021 as well. “In line with government directives and recent news of many major developers scaling back on new project launches, 202 percent compared to 2019 as developers increasingly recalibrate and focus on existing inventories,” said the report.
In 2020, apartment districts will continue to observe the sharp declines, with a few main districts such as Downtown Dubai (-4.0 percent), Palm Jumeirah (-4.0 percent) comparatively bucking the trend. The more money friendly apartment districts such as Discovery Gardens (-15 percent) and Dubailand (-15 percent) have been the least performing areas over 2020.
Gurrapu also said,” Looking historically from the peak values of 2014, villas dropped nearly 31 percent while apartment districts dropped over 35 percent with older districts such as JLT and Discovery Gardens witnessing over a 40 percent drop over the last six years.” adding “However, the villa market has displayed relative levels of resilience with lower year-on-year declines due to evolving occupier needs in the wake of Covid-19. The Springs and The Meadows (+1.0 percent)), Arabian Ranches (-3.0 percent)), Palm Jumeirah (-4.0 percent)) were the most resilient villa districts with nominal changes in year-on-year sales prices, bolstered by a strong Q4 transaction market performance”.
Rents in apartment districts, in normal, have downfall quicker than villa districts with a bigger share of apartment districts encountering double-digit falls. The lowest-performing apartment areas are Dubai Sports City (-19 percent)) and Dubailand (-19 percent)). Villa communities witnessing the biggest year-on-year fall are Jumeirah Village Circle (-13 percent)) followed by Reem-Mira and The Villa in Dubailand (-11 percent)). Prime villa locations like the Palm Jumeirah (-4.0 percent)) and Emirates Hills (-4.0 percent)) have shown resilience in rental drops, mainly in the upper end of the market as the bigger absorption encounters over H2 2020 has ended up with the result in limited stock recently available in the market.
In the year 2020, from peak rents observed in 2014, villas have fallen to nearly 33 percent while the apartment district dropped over 40 percent with many districts showing decreased over the 45 percent mark over the last six years. As rents decrease at a faster pace in comparison to sales prices, yield shrinking has been encountered across villas and apartment districts.