Dubai real estate: what canwe expect in 2021?
Fewer launches, a demand for prime property and luxury penthouses and great value in the rental market will be the key trends
Dubai real estate market is observing an uptick in property transactions and homebuyer’s confidence over the recent months. Despite the ongoing global pandemic crisis, Dubai real estate sector recorded 3,928 transactions worth Dh7.65 billion in November, the highest number of transactions in nine months. Sixty- one per cent of these transitions were in the secondary market whereas 39 per cent were in the off- plan market, according to the recent data from Data Finder.
Sales activity
Despite the challenges of 2020, the residential transaction activity in the secondary market remains steady, says David Abood, Partner at Core. Many demand drivers such as attractive sale prices, lower interest rates and an increase in loan- tovalue ratios are acting as a catalyst, he explains.
“Off- plan market transaction volumes slowed down over - 33 per cent year- on- year as buyers preferred ready units to avoid further uncertainty and delays that may be expected during the pandemic. We expect this preference for ready- built or near completion stock to continue in 2021.”
Abood says that most handovers last year were seen in Dubailand ( Townsquare, Mudon and Akoya Oxygen) followed by Jumeirah Village Circle, Dubai South and Mohammed Bin Rashid Al Maktoum city. “With many major developers recently announcing to curb supply, we expect a slowdown in 2021 handovers with nominal new project launches.”
Prime properties
Luxury market transactions from January until the present ( considered as properties valued at Dh 10 million- plus) totalled Dh17.34 billion, says Jason Hayes, founder and CEO of LuxuryProperty.com. For properties above Dh10 million, the transactions for November totals roughly about Dh1.67 billion. “The demand for luxury real estate in Dubai is at unprecedented levels, caused in part by the magnificent way in which the government handled the Covid- 19 crisis. Dubai is now seen globally as a safe haven, a place of prosperity where people can enjoy all- round good weather,” he says.
“2020 has been an incredible year, and 2021 promises to be even better. In many communities across Dubai, we are beginning to see shoots of recovery and our private- client team is at present working on some Dh100 million- plus worth of deals on the Palm Jumeirah and Dubai Hills. Once these properties transact ( most likely in January), that will lay the foundation for what may be the most incredible year for Dubai real estate.”
Hayes anticipates 2021 to be the year of the penthouse, with super- prime projects, such as One at Palm Jumeirah, Dorchester Collection, Dubai, Royal Atlantis and the Residences Dorchester making headlines. “The mansions at Dubai Hills are coming to the market now in completed form, and one can expect to see some rather spectacular homes being delivered to the market in Q1 and Q2 2021,” he explains.
Holiday homes
When viewing the shortterm rental properties segment, Mark Kennedy, co- founder and CEO of Kennedy Towers notes that the larger units and the villas have recovered the fastest. “When remote working started becoming commonplace, and tenants started spending more time at home, the value of extra space and private gardens started to increase; as did the demand for our larger properties. Rental prices for villas in areas such as the Palm Jumeirah and Emirates Living are currently up 20 per cent year on year from the pre- pandemic period.”
“We saw short- term property rental prices reach the bottom of this cycle during the initial lockdown period in April last year. Prices have shown a steady recovery since and have now surpassed pre- pandemic levels. Looking forward, widespread vaccine distribution in the first quarter will help resume travel, which will complement the recent visa initiatives. So we anticipate this rate of recovery to continue throughout 2021 in the build- up to Expo 2020 Dubai.”
He adds there is always a premium for short- term rentals over long term rentals due to the flexibility and convenience of the lease terms and the extra services included in the lease, regardless of the stage of the economic cycle.
“On average, investors can expect their gross rental yields to increase 50 per cent over long- term rental yields when leasing on a short- term basis. Investors must remember that the holiday- home industry is regulated closely by DTCM. While there are many benefits to renting on a short- term basis, it must be done in away that upholds the high standards of Dubai’s tourismindustry.”
Rental scene
Richard Waind, group managing director at Better Homes observes a split in the rental market between apartments and villas in the last fewmonths of 2020, where the rents for apartments have continued to come under pressure; however, demand for villas has been on the rise. “We have seen price stabilise and even start to show signs of an uptick in well- established villa communities.”
“The situation with the pandemic is evolving and subject to swift change, but with the rollout of vaccines, I would hope to see an influx of residents to Dubai that will help the rental sector. Dubai has taken strong steps to attract people and businesses to its shores. It is looking to become a net gainer in terms of the population from the pandemic. This, in turn, should result in an increase in demand for rental properties and a reduction in vacant units.”
He considers villas to continue to perform better than apartments as the trend towards outside space and larger living areas to accommodate home offices looks to continue. “We can also expect more supply in the apartments sector so tenants, on the whole, are likely to enjoy another year of great value in the rentalmarket in 2021. But as the economy continues to recover and Dubai continues to attract international talent, landlords should start to feel some respite from falling rents.”