Stock Dubai Hills
The Palm has seen some eye-popping deals in recent weeks, and Dubai Hills is another location where selective price gains have showed up. But an across the board increase for Dubai property will take more time. Image Credit: Antonin Kélian Kallouche/Gulf News

Dubai: There is still time for likely property owners to make up their minds – prices in 80 per cent of the UAE freehold residential market will likely remain at 2020 levels. And it could be next year before property values start to make some headway, according to the consultancy Knight Frank.

Sure, there are certain areas in Dubai that is already showing signs of price recovery, especially top-end destinations such as the Palm fronds and Dubai Hills. But for the wider market, homes there are still coping with the double-digit price dip of the last two years.

In its latest update, Knight Frank says that population growth needs to see a spike for property values to make gains again. “With population levels in Abu Dhabi and Dubai estimated to have declined by roughly 5 per cent in 2020, growing levels of supply and existing vacancy levels, residential property values in both fell in 2020,” the report says. “Whilst population growth is expected to return in 2021, it will likely not be at least until late 2022 before we see population levels return to their pre-pandemic levels.

“In Dubai, this lower level of demand will be further compounded by a continuing influx of supply, which in turn is likely to continue to put pressure on property values.”

Office demand

In Abu Dhabi, the relatively low levels of new supply have ensured stability on rentals. But in Dubai, with rents "continuing to fall and a surge in vacancy, office property values have declined materially on average," the report states.

Retail reality

After a year of unprecedented declines in visitors and sales, "it is not surprising that we have seen retail property values decline in both Abu Dhabi and Dubai in 2020," the report adds. "In Abu Dhabi, given its relatively low levels of upcoming supply we expect values to remain stable. Whereas in Dubai, given significant levels of upcoming supply and hybrid - or turnover-only rental models - going forward, we expect values to continue to decline in 2021."

We forecast the vast majority of the UAE’s real estate market will see values remain at similar levels to 2020 or even begin to increase in some cases

- Taimur Khan, Head of Research at Knight Frank Middle East