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Dubai real estate: What are you buying during the pandemic?

Despite a quarterly rise in sales, we can expect further decline in prices and rents

Last updated: October 14, 2020 | 13:52

5 MIN READ

What kind of homes are people buying during the pandemic? A recent Knight Frank Global Buyer Survey on buyer attitudes showed that upgrading the family’s primary residence ranked highest as the main reason for purchasing a property, while access to good healthcare ranked second, acquiring a holiday home ranked third and business or employment reasons ranked in fourth place.

Buyers, when looking for a second home abroad, said they would be influenced by the government’s handling of the Covid-19 crisis, the survey said and countries, such as Germany, Austria, Greece, the UAE, Singapore and New Zealand, are likely to rate high among second home buyers in the coming months.

Taimur Khan, associate partner, real estate strategy and consulting at Knight Frank Middle East agrees that there has been a demand for holiday homes in Dubai from international investors, as well as for branded residences with great services.

Market handovers and performance

Between January and September, Dubai has seen nearly 21,500 units come to market, bringing total residential stock to 571,500 units, according to reports from Core Middle East. In the last quarter 10,500 units are expected to be handed over. Although handover volumes are significantly lower than the initial forecast of 49,000 units at the beginning the year, we will still see nearly 32,000 deliveries by year end.

According to the latest Dubai Residential Report from Chestertons, despite a clear quarterly rise in property sales in Q3, Dubai’s real estate market is expected to face further challenges in both the rental and sales market. Increased sales activity, which rose by 50 per cent quarter-on-quarter, was largely attributed to pent up demand from Q2, along with developer promotions offered to clear built but unsold inventory. Total transaction volume was down 21.7 per cent from Q3 2019.

Chris Hobden, Head of Strategic Consultancy, Chestertons Mena, said: “Dubai witnessed a clear increase in transactional activity during the third quarter, building on a recovery seen during the final month of Q2, following the easing of COVID-19 restrictions. “However, transaction volumes remain lower annually, and we expect both prices and rents to face further downward pressure over the final quarter. The ongoing economic impact of Covid-19, and a likely reduction in the emirate's population, both key drivers of Dubai residential prices, are set to hamper market performance.”

Jyotsna Hegde, President of Sobha Realty, says buying behavior and preferences are changing as a result of the pandemic and consequent lockdown. “There has been a sudden increase in demand for townhouses and villa style properties. Homeowners are replacing great views with open spaces, backyards and terraces, which has translated into a significant increase in inquiries for our villa properties as compared to 2019.”

“Sobha's new Waterfront and Forest villa land plots allow homeowners to buy land within the Sobha Hartland community and build customised villas. This offers flexibility to prioritise key areas in their lifestyle," says Hegde.

Villa deliveries in Dubai this year include the Noor Townhouses by Nshama in Townsquare, Pacifica by Damac in Akoya Oxygen (Dubailand), Casa Dora (Serena) Villas by Dubai Properties in Dubailand, Maple 3 by Emaar in Dubai Hills Estate and Arabella 2 in Mudon (Dubailand). In the apartment category, handovers this year include Rawda and Hayat Boulevard by Nshama in Townsquare, multiple deliveries by MAG in Dubai South, Merano Towers by Damac in Business Bay, Boulevard Point by Emaar in Downtown Dubai and One JBR by Dubai Properties in JBR.

Purchase trends

So what are investors and end users buying in Dubai? We asked experts in real estate and here is what we heard:

David Abood, Partner at Core

Sustained price drops in the market have piqued the interest of investors looking to take advantage of ongoing market conditions in this period of reduced liquidity. But despite strong investor interest, capital preservation has been a concern for home buyers over the last few years due to sustained price softening. Investors prefer smaller unit sizes, such as studios, one beds and two beds as they have lower entry points and provide higher yields compared to larger apartments and villas. We are seeing tenants who have a long-term view of residing in Dubai, transitioning from renting to owning as a form of savings plan due to attractive entry level pricing and easy access to finance. These end-users typically prefer ready-built apartment and villas to accommodate growing family requirements.

Andrew Cleator, Managing Director, Luxhabitat Sotheby’s International Realty

Investors are targeting ready townhouse and villa communities, with some picking up multiple units in established communities like Jumeirah Golf Estates, Emirates Living, Palm Jumeirah, Arabian Ranches and Jumeirah Islands to name a few. Again, this is down to the fact people value the quality of their living space far more these days - ultimately meaning that the rental demand for these types of properties will remain strong and lucrative in years to come.These areas have also been popular with end users.

Lewis Allsopp, CEO, Allsopp & Allsopp

The safest option for buyers looking to invest in Dubai is purchasing in a popular area with a reputable developer, a good view and a high quality apartment. Even at 6 per cent the rental yield may not be as high as in some other areas, however, the investor will have a better chance of the property always being occupied, being resilient in downward markets and of capital appreciation. An increase in rental yield can sometimes be achieved by offering a higher number of rental cheques.

Barnaby Crompton, Director, Crompton Saltini Real Estate

The wave of people leaving apartments has had an effect on the house prices. Springs and Meadows, for example, has being the most obvious to benefit from the migration. These areas have seen transactional values increase by as much as 3 per cent with demand beginning to outstrip supply. If I’m an investor I’m still interested in the low-hanging fruit, the studio and one-bed apartments. These have low service and maintenance costs and high yields. There will always be a market for small apartments.