In November of 2020, Dubai’s real estate market made waves when it smashed a seven-year record for transactional volume – exactly 12 months later it broke its own record, hitting an 8-year high with Dh17.96 billion. At the end of 11 months, the total value sits 88.4 per cent higher than the entirety of 2020, which is a phenomenal comeback from the doom-and-gloom scenario predicted when the pandemic first hit.
Demand has been incredibly strong across segments and property prices are on the rise. Overall, the market is set to end 2021 on a high note, with analysts predicting a very sunny outlook for 2022. Several factors can be attributed to this remarkable turnaround – the pandemic was effectively managed from the start with strict protocols in place, followed by a focused vaccination drive that led to the UAE becoming the country with the highest number of vaccinations per capita. As we take a closer look at the performance of the market, we can narrow down three key drivers over the course of 2021.
Low interest rates
Interest and mortgage rates are at an all-time low and for the first time in Dubai’s recent history, the cost of financing a home purchase is putting investors in a position where they can buy at a premium and still achieve positive returns on rental income. Dubai has always been a top pick for investors with yields far more attractive than what you can expect from other markets. When you add in a low interest rate on top of that, it leads to a winning investment proposition.
One of the potential worries in the Dubai market was one of oversupply, particularly with new communities being developed and even newer ones launched. Those worries were always considered to be overblown, but in a post-Covid market we have seen the opposite effect. Across villa neighbourhoods, especially in core masterplanned communities, we are seeing a shortage of inventory as demand has risen steeply.
Sale prices within these communities have risen as a result, which has allowed adjacent areas to benefit from price increases as well. Because of the shortage of stock, we are really in a position now where sellers are able to command market price for their homes. If a buyer gets too picky about pricing, there are several more waiting in the wings who are willing to pay the asking price – this is not as market for negotiation.
More international investors
Demand is largely being driven by international investors and expats who are looking to make Dubai their new primary residence. This is the culmination of several government initiatives that were rolled out within the past five years, such as lower investment thresholds, long-term visas, Golden Visas (a special category of 10-year residence visas), the ability for foreign nationals to have 100 per cent ownership of businesses, among others. Effective pandemic management and the buzz about the Expo 2020 have also played a significant part in boosting investor confidence.
When you connect the dots to the other two factors listed above, you end up getting a picture of the perfect investment landscape. There is a greater level of security and a higher level of yields available in Dubai than investors would find in their home countries. Property prices, while higher than previous years, are in line with the market and provide incredible value - $1 million can buy almost four times as much square footage as it would in cities such as London, New York and Hong Kong. And in a comparison of 25 key markets, Dubai is the only one that stands out as being undervalued.
As we make our way into 2022, the outlook for the real estate market remains bullish - it is expected that Dubai’s star will continue to rise over the short- to medium-term.
The writer is Chief Operating Officer at LuxuryProperty.com.