Property prices in Dubai are still well below their previous market cycle peak of 2014, with Expo 2020’s positive impact on property prices becoming more visible in the fourth quarter of this year or early next year, which is accelerating recovery in the sector, say industry executives.
Property Monitor’s chief operating officer, Zhann Jochinke, said the Dubai property market continues to recover with prices increasing for the 11th month in a row, although the pace of the recovery has slowed. Prices rose by 1.2% in September to Dh968 per square foot.
“We are now 19 per cent away from the peak of the previous market cycle. Should the recovery slow to smaller and sustainable monthly price increases, there is a greater likelihood of the recovery lasting longer and the possibility of hitting a new market peak in the current cycle,” he said.
Property prices in the emirate are still among the affordable of major cities around the world due to a persistent decline in rates over the years, despite a recovery in prices over the last few quarters.
According to the International Monetary Fund, property prices in the UAE will drop nearly four percent in 2020 – one of the biggest drops in the world because of the impact of the Covid-19 pandemic. Although new Coronavirus cases have dropped to around 100 per day, the recovery in the real estate sector is accelerating.
Property Finder data for September shows that Dubai real estate transactions crossed the Dh100 billion mark in September as the increase of monthly sales transactions and their value leading to Expo 2020 has been phenomenal, thanks to the presence of many foreign investors in the market.
The Property Monitor reports that the impact of Expo opening has not yet been felt in the market, but that it will have a positive influence on the market in 2021 and 2022, as new buyers discover the affordability of Dubai compared to other major financial centres and capital cities.
Since the beginning of the real estate market recovery in Dubai, the villa and townhouse segments have performed particularly well, especially in traditionally sought-after locations.
According to a real estate consultancy and advisory firm, ValuStrat, 2021 will likely be the best year in a decade for residential investments since September transaction volumes already exceeded all annual totals since 2010.
Compared to January 2014, residential capital values have increased by nearly 10 percent annually to reach 72.5 points in the third quarter of 2021.
A widening buyer-seller expectation gap regarding pricing is now evident as inventory dries up amid strong demand for villas. In recent months, aggressive pricing by sellers and their brokers has led to overpriced properties staying on the market as buyers explore other options rather than satisfy property owners’ demands, said Property Monitor.
“We, therefore, expect apartments to carry forward the recovery from here on, given multiple options available in the market and the greater headroom they have for price appreciation,” said Jochinke.