TOWERING HIGH
The UAE’s real estate market has seen strong growth this year, with Expo 2020 Dubai adding further impetus to a sustained recovery, writes Lynnette Sacchetto, director of Research and Data at Property Finder
The Dubai real estate market’s stellar performance has not failed to impress even the pessimists over the last year and a half, and Q3 2021 has been no different, continuing the phenomenal story of the booming market. During the pandemic – from H2 2020 until date, the various factors that led to the growth in UAE real estate, specifically in Dubai, has been pent-up demand, low mortgage interest rates, proactive government initiatives, policy shifts in various residency programmes and the resilience with which Dubai handled the pandemic and kept the tourism industry alive, among other things.
In addition, you can’t talk about the residential real estate market without highlighting the extreme shift and high demand in the villa/townhouse segment for both sales and rentals. This trend in demand started at the beginning of the pandemic and has remained strong to date. The prices of villas/townhouses are continuing to rise due to high demand and low supply, and since we are only expecting 6,000 new units to be completed by the end of 2021, this doesn’t add much of a dent to the supply equation.
As of September 30, 2021, Dubai has recorded over Dhs104bn in real estate sales transactions, which is the highest value recorded since 2017. Mortgage transactions are also at an all time high, breaking all records year-to-date. Mohab Samak, managing director of Engel & Völkers in Dubai says: “Surprisingly, the property sales volume in 2021 jumped almost twice the sales volume in 2020. Far off from what people had thought, the Dubai real estate market has picked up relatively fast despite the setback in 2020 due to the global pandemic. The hype began when the property prices dropped, which created a great opportunity for investors to purchase properties at a lower price.”
He adds: “According to the latest forecast, Dubai property prices will remain modestly priced for a few more years which means the real estate market standing will be on a steady course during this period.”
Looking specifically at the off-plan market in Dubai, during the pandemic, sales took a hit and dropped to about 30 per cent of total transactions, compared to 50 per cent of total sales transactions in the years before the crisis. However, this trend has changed significantly in 2021. To date, off-plan sales have had the highest value of sales transactions that the Dubai real estate market has seen in over eight years (since December 2013). The volume of sales transactions between secondary and off-plan stands at about 50/50. It is evident
from this data that investors see the value in investing in the future of Dubai.
According to Husni Al Bayari, CEO and founder of D&B Properties: “I am and have always been optimistic about Dubai’s future, it has proven to be a resilient, positive and progressive city and that is exactly what attracts investors. The government will continue to find and create a healthy positive ecosystem for investors, and it will continue to successfully attract FDI from all over the world.”
BEYOND DUBAI
We are seeing a similar picture in Abu Dhabi, although at a somewhat slower pace. The villa/townhouse segment is in high demand and prices have risen steadily in those areas.
According to Alan Kaye, head of Asset Management at LLJ Asset Management, “Abu Dhabi market has generally played catch-up, although there has still been an average increase in property values in Q1 and Q2 of up to 9 per cent. In some areas, increases as high as 20 per cent have been reported.
“It needs to be remembered that since 2014, there has been a steady decline in property values and as property prices are cyclical, there had to be a correction at some point in time. The lowest point in the market would seem to have been around November 2020 and since then a steady increase in demand and subsequently prices has been noted, spurred on by the events in our neighbour [Dubai]. What is interesting is that this demand has been coming primarily from end users who have realised that they can often be paying less in mortgage payments than they would be in rent and then eventually owning the actual property,” he adds.
In the northern emirates, we have seen trends in migration patterns due to larger units available at much affordable prices compared to Dubai and Abu Dhabi, coupled with large investment in the infrastructure. Hanan Janho, managing director of Emirates Properties says: “Expo 2020 has helped to revive the real estate market in Dubai, and that has had a ripple effect on the other emirates to some degree. In terms of new developments, the northern emirates over the past years have developed their own identity with their real estate markets maturing, complementing Dubai rather than competing with it, with each emirate having its own unique selling point and projects.”
Yasser Hillayel, managing director of Yas Properties adds: “Within the last 10 years, the northern emirates have been going through a period of prosperity with greater expectations of attracting investors from inside and outside the country. This can be attributed to the development of a modern infrastructure of road and transportation networks. This has added more value by providing commercial access between the northern emirates and Dubai as well as Abu Dhabi. Subsequently, they provide a lifestyle within complexes that combine safe housing and luxury to suit the numerous residents of various ethnicities currently residing in them.
“Ras Al Khaimah, for example, has been establishing itself more as a tourist destination with Jabal Jais and various outdoor activities with regards to mountains and the sea. Umm Al Quwain is an affordable and peaceful beachside tourist destination, while Sharjah has earned the reputation of a cultural hub with its museums and heritage sites. Ajman positions itself as a charming, serene and more affordable living alternative to Dubai – only a short distance away from the business hub yet providing a more tranquil and family oriented environment. As such Ajman has always seen a stable demand and therefore new projects keep coming up at a consistent pace. For example, we are soon launching a gated community with over 1,500 villas/ townhouses. With incessant development, Ajman is taking a bigger share than other northern emirates in the real estate business,” adds Janho.
“Ajman has always seen a stable demand and therefore new projects keep coming up at a consistent pace. For example, we are soon launching a gated community with over 1,500 villas/townhouses”
“This year, bookings for November and December were done in August, as the whole world is excited to see the Expo. Consequently, the rents did increase, and we are seeing many landlords transitioning into short-term rentals, having big expectations for the upcoming period”
THE EXPO EFFECT
With Expo 2020 Dubai currently underway, many in the UAE are optimistic about the opportunities it will bring to the real estate market. “The Expo is merely a positive milestone in the future plan for this city. It will definitely have a direct and positive impact on the UAE’s progress and will present opportunities that will solidify Dubai’s position on a global scale, but what I am very confident about is that the opportunities will be utilised and converted by Dubai to add value to everyone living in it,” opines Bayari.
In the northern emirates, Hillayel says the mega event is anticipated to spur a steadfast recovery for the remaining part of the year and 2022. “Due to the return of tourism, the many projects that have been approved by developers will be launched in the coming months and the impact of Expo 2020 and the goals set to welcome nearly 25 million visits. This boosts our confidence and projections of a faster recovery in the northern emirates’ real estate market.”
Adds Samak: “Expo 2020 is set to open doors for participants, tourists, and investors to access a bigger network as the UAE promotes sustainability and mobility, which will boost the country’s economy through global exposure. More foreign investors are expected as supplies and investment opportunities increase. Based on the most recent analysis done by Dubai real estate experts, there is no expected fall in the market in 2022. Therefore, significant movement in Dubai properties is still anticipated since the prices will remain affordable.”
THE RENTAL EQUATION
Looking at the rental and short-term rental markets, the story was very different during the last year and a half with a large amount of supply, economic instability and migration of residents back to their home countries causing disruption. However, there has been a huge shift in demand and trends when it comes to larger units with open spaces – such as for the villa/townhouse segment. There was also an increase in demand for short-term rentals as tourism sustained throughout the pandemic and has started to increase due to Expo 2020 and the winter months ahead of us. “People are opting for bigger units largely because they are coming in groups or with their entire families, naturally needing more space. Another major change in the short-term market is the longevity of the stay; unlike before, visitors are almost exclusively booking for more than a week, often for a full month. This year, bookings for November and December were done in August, as the whole world is excited to see the Expo. Consequently, the rents did increase, and we are seeing many landlords transitioning into short-term rentals, having big expectations for the upcoming period,” states Abdullah Alajaji, founder of Driven Properties.
The Abu Dhabi market has seen a similar trend, although at a much slower pace. According to Ibrahim Khalil, deputy general manager of United Gulf Properties: “Villa rental rates recorded an average increase of 1 per cent in Q2 2021, predominantly driven by the rise in interest for well-developed villa communities located on Yas Island, Saadiyat Island, and Al Raha Beach. Tenant movement was dominated by residents looking to upgrade/upsize, with most shifting to villas and townhouses. The landlords are offering incentives such as flexible rent period, multiple or monthly payments, service charges waiver and/or reduced fit-out cost. Expo 2020 will also directly contribute to residential rental recovery. There are a range of factors collectively impacting the market such as the UAE’s demonstrated resilience in fighting the pandemic, successful vaccine rollouts positioning Abu Dhabi as the safest destination, strong domestic focus on job creation and fiscal incentives. Overall the market will be better, but prime locations will get the highest attention during the event period.”
Overall, the UAE real estate market has weathered the Covid storm well, with each emirate focusing on its strengths and unique selling points. With Expo 2020 starting off strong, I would expect the UAE real estate market to continue to grow and stabilise across the various sectors into 2022.