A LOOK BACK AT DUBAI REAL ESTATE IN 2021

12th January 2022

The real estate market in Dubai continued to scale new heights over the course of 2021. After a near catastrophic stumble at the onset of the Covid-19 pandemic, the market took on a sharp upturn with transactional activity reaching levels that have not been seen for nearly a decade. With the administration of sound government protocols across 2020 and a successful vaccine campaign in the first half of 2021, Dubai became one of the few safe havens of the new normal, where people could go without fear of an imminent lockdown. The demand for real estate from international buyers skyrocketed as a result, particularly from buyers across Europe and East Asia, and even domestic demand soared as residents of the city sought larger homes that would offer a greater sense of privacy and security. With supply, particularly at the higher end of the market, racing to keep up with this invigorated demand, property prices have risen by 4.4% on average by the end of Q3 2021 and transaction levels during that same period totaling just shy of $24 billion, which is 22.6% higher than the transactional record for the entirety of 2020.

Brief Overview

There are several factors that have contributed to the remarkable recovery of Dubai’s real estate sector – the efficient government response to the pandemic, a swift resumption of international flights, and the renewed hype around Expo 2020 that was built up over the course of the year.

Some of the key takeaways from this year are:

  • Interest and mortgage rates are at an all-time low
  • Investor confidence has increased as a result of pandemic control measures, as well as government initiatives such as long-term visas and legal reforms
  • Buyers and tenants shifting from apartments to townhouses/villas to have more living space and greater sense of privacy
  • Property sale prices are rising, with villa prices outpacing apartments
  • Rental prices are lower on average, with apartment rents registering a 2.7% drop
  • Villa rental prices have risen sharply by 15.5%
  • Overall sales volume in the first three quarters of 2021 is higher than the total annual sales for 2 of the past 10 years

Record-Breaking Deals

According to the statistics from the Dubai Land Department, Dubai’s governing real estate body, the market has been moving at an incredible pace this year, with some of the most expensive sales and rentals in Dubai history, including villas sales at upwards of $30 million and villa rentals exceeding the $1 million price point. This trend is in stark contrast to property markets elsewhere in North America, Australia and New Zealand, where prices are stretching the limits of affordability. 

Market Fundamentals

Real estate is in a constant state of flux – trends come and go, so one has to keep a finger on the pulse of developments as they happen. Fortunately, the fundamentals of the market more or less remain constant, and understanding them can help us understand the shifting patterns of the market.

It is important to note that property markets are highly localized; with different scenarios in every state, city and neighborhood, so long-term stagnation is out of the question.

Seller’s Market

Property prices are mainly driven by the supply-demand matrix. Economics dictates that high demand and low supply pushes prices up, and vice versa. Inventory, particularly at the higher end of the market, is fairly limited. For homeowners, it is a more attractive proposition to continue living in a property that offers them a complete lifestyle, so prime and super prime homes will rarely go up for sale. This, combined with the rise in demand, has created a seller’s market – sellers are now in a position where they can command market price for their homes, with no room for negotiation.

While this appears to be inflationary at a glance, market price is in fact the right price to be paying. Research from Swiss Bank UBS has looked at the data from 25 key global markets of which only Dubai is currently undervalued. 

“The market is moving at an incredible pace with new off-plan projects selling out in record time. For high-end homes, Dubai is witnessing a historic boom, capturing 2.5% of the property market share as people from all over the world view the city as a primary residence rather than just a lifestyle destination. Cash buyers are the primary market drivers this year, having the spending power to close sales deals without the need for third-party valuations. Anyone who is looking for a deal or is on the fence runs the risk of losing out on the property they want.”

Dubai Rentals in 2021

Rental demand has also been on a high with tenants seeking larger spaces for themselves and their families. This has had a positive impact on rental prices for single-family homes such as villas and townhouses, where rents have gone up by over 15%, while apartments have been on the losing end with a nearly 3% drop in prices.

According to LuxuryProperty.com’s Leasing Director Camila Pretorius, a noticeable recent trend is of people moving from apartments into townhouses and villa communities that offer pristine air, lush greenery and plenty of open space. Consequently, neighborhoods such as Jumeirah Golf Estates, Victory Heights, The Meadows, The Lakes, Greens and The Springs are in high demand.

Outlook for 2022

If history is an indicator of things to come, the property market of Dubai will skyrocket during and after Expo, as it has in previous host countries. The event is well on track to meet its target of more than 25 million visitors, who will get to experience unparalleled luxury that the city offers. In a post-Expo landscape, we expect a continued increase in overseas investors who are looking to gain a foothold in the Dubai property market, as well as buyers who have opted to make Dubai their primary residence. Foreign Direct Investment (FDI) is also poised to be a gamechanger and help to attract people and workers from all across the globe.

But there is more to it than that – Dubai has always had a knack for standing out during times of upheaval, positioning itself as a safe haven where people can escape the unrest in their own countries. During the pandemic it has continued to be a beacon of safety, with well-managed safety protocols and a strong vaccination campaign bringing it closer to normalcy than many other parts of the world. Over the last quarter of 2021, infection rates have plummeted to the lost double digits and continue to drop. Combining all of these factors, you get a very sunny vision for 2022. HSBC, in fact, has delivered a bullish outlook for the market, and the sentiment from most analysts seems to be that Dubai real estate will be on a high for some time to come.

Taking a global view, the property market is expected to reach a state of equilibrium around the second quarter of 2022. One of the key considerations is the involvement of millennials in the market, as they are hitting peak homebuying age. We can accordingly expect a huge surge in demand from first-time homebuyers, primarily in the North American market. Banks are also offering reduced interest and mortgage rates in most parts of the world in a bid to attract potential homebuyers and investors, which should help in keeping property demand afloat.

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