With Expo 2020 Dubai underway and the UAE’s successful coronavirus vaccination drive resulting in the lowest number of Covid-19 cases recorded in the last 12 months, Dubai’s real estate sector is flourishing with the highest-ever residential secondary market transaction values recorded in the second and third quarters of this year, according to research by Cushman & Wakefield Core, a research and advisory agency.
Expo 2020 is expected to draw a large number of visitors – and 25 million visits, according to organisers - while generating thousands of direct and indirect jobs and could potentially cause international visitors to decide to relocate to Dubai, leading to increased real estate demand over the short-term.
“The buzz in the city is entirely different than it was this time last year with schools reopened, most flight routes resumed, offices, malls and restaurants running at increased occupancy and Expo 2020 successfully inaugurated. The transition to normalcy with robust public health and safety measures in place is signalling the end of Covid-19 restrictions in the UAE and accelerating real estate recovery,” said Prathyusha Gurrapu, head of Research & Advisory at Cushman & Wakefield Core.
“Although green shoots were visible since late 2020 and we remained positive of Dubai’s real estate performance for 2021, the sharp rises in capital values and rentals, particularly in the established villa and prime apartment districts, have considerably outperformed most market forecasts,” she continued.
When it comes to the value of residential transactions, the secondary property market recorded the highest-ever transaction value in Q2 and Q3 2021. Meanwhile, the off-plan market is seeing a ‘V’ shaped recovery with transaction volumes up by 108 percent over Q3 2021 vs. Q3 2020 and 18 percent when compared to Q3 2019, signalling a return to pre-pandemic levels.
Close to 24,000 units have been delivered to date in 2021, with an additional 13,000 units expected by year-end, totalling 37,000 units, the highest annual number of residential deliveries in Dubai over the last decade.
As apartment units constitute a major portion of the delivered inventory, accounting for 86 percent of the total residential handovers this year, this is further escalating villa price recovery due to limited villa stock. New project announcements so far in the year are 47 percent lower than 2020 and 79 percent lower than 2019 for the same period.
While the villa sales market has been leading the recovery since late 2020, with the apartment sales market lagging there has recently been a gradual rise in apartment-sale prices in certain communities. However, the apartment sales market performance continue to be fragmented with seven out of 11 districts tracked by Cushman & Wakefield Core witnessing a year-on-year rise while the city-wide apartment sales price average saw a nominal 2 percent rise.
Meanwhile, eight of the nine villa districts tracked by Cushman & Wakefield Core saw a 14 percent year-on-year increase in sales prices and the city-wide villa sales price average saw a robust 16 percent year-on-year rise.
The rental residential property market also reveals this misbalance between villas and apartments, with the villa rental market seeing soaring rents while most of the apartment stock continues to see rental contractions and absorption challenges. Eleven out of the 23 apartment districts tracked by Cushman & Wakefield Core continue to see year-on-year rental contractions with apartments in Palm Jumeirah being the only district to see a 12 percent increase. City-wide apartment rents are still 5 percent lower than Q3 2020.
“It is imperative to note that while these rental and sale price increases are significant, they are compared to the lowest point in the market cycle over Q3 2020. All villa markets are still significantly lower than their 2014 peak values and are gradually moving towards them,” said Gurrapu.
“While the preference for private, open and additional spaces would remain in a post-Covid world, it would be interesting to see if the villa market continues to see a sharp rise in values or witness corrections as most Covid-19 related restrictions have been lifted with schools and offices resuming to near full occupancy,” she added.
