On an upward trend
We look at how Dubai’s real estate sector is evolving post Expo 2020
It’s been two months since the curtains were drawn on Expo 2020 Dubai. Despite a year’s delay, the event successfully managed to bring the world together in Dubai. The preparations to welcome a global audience to the emirate began when Dubai was announced as the host of Expo 2020. As a result, the real estate sector went into overdrive, developing properties in anticipation of the millions of visitors expected to come to the country.
The industry soon realised that demand for short-term rental units and increased interest in property ownership, either as a resident or an investor, would rise rapidly. For many cities, hosting a mega event is now the single largest undertaking in urban development. The first supportive argument for hosting a global event would be the potential increase in visitor numbers, a spotlight or halo effect that brings new attention and vibrancy to the host city. Similarly, expenditure on hosting a mega event is often justified via the multiplier effect and a boost to the national economy. Real estate studies in a range of global cities do find a positive impact on property values. Though as we saw, these property price increases are not simply linear.
Academic studies have found that the largest price increases in property prices hosting mega events occur in the five years after the event. So are we on a similar trajectory in Dubai post the expo?
Following a dip in real estate activity during the beginning of the Covid-19 pandemic, housing prices in Dubai began to recover in 2021 in the run-up to Expo 2020, particularly in the luxury real estate sector, which ended the year with record-breaking transactional value and sales volume.
A market report by Property Monitor shows that property value in Dubai now stands at
Dhs1,000 per square foot, the highest since January 2019. Additionally, it is reported that transaction volumes in February this year stood at 6,346, growing nearly 10 per cent monthly. Furthermore, a total of 12,119 sales transactions were recorded year-to-date, a 17.7 per cent increase over 2017, the previous best start to a year.
Major public and private developers in the UAE have been focused on ensuring a faster execution of the ongoing projects to deliver the best quality product to investors. The pace has also been a response to various government initiatives and amendments to laws that will undoubtedly attract more residents and longterm investors to the country. For example,
“AT PRESENT, DUBAI IS WITNESSING A DEMAND-OUTSTRIPPING-SUPPLY PLAYBOOK; AND WITH GLOBAL INFLATION SOARING, THE INCREASED COSTS OF BUILDING MATERIALS FOR NEW DEVELOPMENT AND HIGHER BORROWING COSTS, NEW DEVELOPMENTS MIGHT STAGNATE, LIMITING NEW SUPPLY ENTERING THE MARKET AND PUSHING HOUSE PRICES HIGHER”
the recent amendments to the citizenship laws allow investors, professionals, special talents and families to seek long-term/permanent residence under certain conditions. Additionally, the UAE has made many additions to its real estate laws. These include the new ‘Dubai Building Code’, which outlines a set of construction rules promoting sustainable development and innovation in building design and reduction of energy and other running costs, which is critical in today’s everimportant ‘ESG’ investing.
However, with all these changes and an increased interest in buying a property, it is also imperative to look at the inventory currently available in Dubai while prices also seem to be climbing. A recent report by S&P Global suggested that property prices and rents in Dubai’s residential market will continue to increase in 2022.
In addition, Property Monitor reported that more than 3,000 off-plan residential units entered the market for sale in February. Townhouses represented 58.5 per cent by volume of this new inventory, while apartments and villas accounted for 36.8 per cent and 4.7 per cent, respectively. According to Property Monitor, the month-on-month increase is largely the result of newly handed over projects that are now eligible for home financing, particularly for townhouses, which saw loan volumes increase by 58.9 per cent.
At present, Dubai is witnessing a demand out stripping-supply play book; and with global inflation soaring, the increased costs of building materials for new development and higher borrowing costs, new developments might stagnate, limiting new supply entering the market and pushing house prices higher.
While Expo 2020 has been a major catalyst in real estate growth in the emirate, the next phase will be even more exciting. Despite the rising real estate prices and increasing inventory, the interest from international and local buyers and renters will be an ongoing trend, with Dubai’s supportive government legislation being a key driver of new population growth over the next five years.
The city is developing to accommodate more new businesses, more flexible ways of living and working in Dubai, and the recent trends in ‘lifestyle migration’ into Dubai will undoubtedly continue and boost future demand for the real estate sector.