A lot changed for Dubai’s property market in these 12 months - will 2022 then be more of the same? Or could it be that the speed at which the property market in the city and the UAE is being reshaped move into a higher gear?
For the first time in five years, there is no more talk of oversupply concerns in Dubai’s residential space. Developers have moved back from ditching off-plan launches altogether to come up with new projects, selectively.
As for property sales, the September to November phase set new records for home sales in Dubai, and December numbers to date are looking just as good. The FOMO (fear of missing out) factor is in full play. Investors don’t want to be caught having to pay extra by delaying the purchase.
Dubai property market is heading into the next year with record sales, resurgent demand and confident developers.
All the recent changes brought about by the Golden, Green, Freelance and Retirement visas, the allowing of 100 per cent ownership by foreigners across business sectors, and the UAE’s strategic positioning as the place to be and to do business from is giving booster shots to the property market.
The most striking trend in 2021 was that more and more residents in Dubai, Abu Dhabi and Sharjah were turning into property owners.
These buyers were finally convinced that they were better off in their country of residence than opt for purchase back in their home countries. If it was the wealthy expats who bought homes here, after the 2008-09 global financial crisis and property market decline, this time the buyer profile had more of the employed lot opting for ownership. If there was a game-changer driving this, it was the issuance of 10-year residency visas.
Is it the right time to buy property in UAE?
Are investors truly better off putting up their cash or mortgage on a property now than waiting for a better deal later? Market sources say it depends on where the investor is looking.
If luxury is what the investor is aiming for, then waiting will only harm the chances. And they are not even talking about the Dh50 million-plus homes on the Palm, Dubai Hills and Emirates Hills, all of which are established destinations for living life deluxe.
The upturn in sales is being felt at newer locations: “New projects such as Port de La Mer, the Emaar Beach Front and Madinat Jumeirah Living will most likely see steady price increases as they get handed over,” said Firas Al Msaddi, CEO of fam Properties. “That’s due to the very high demand for waterfront properties in Dubai.
“Villas – wherever they are - will follow the trend at these three locations due to the demand and the scarcity in supply.”
Average starting prices are in the Dh1.5 million to Dh2 million range at the three emerging destinations. Compared to what waterfront properties on the Palm and Jumeira Bay are going for, these are relative bargains.
Nikita Kuznetsov, founder and Partner at the Metropolitan Group, believes that investors can no longer afford to wait too long to make up their minds. “There is very little stock out there,” said Kuznetsov. “In some popular areas, property values have doubled or even tripled. We sold a two-bedroom transaction Bulgari Residence for Dh16 million (at Jumeira Bay). In Villa Amalfi, units that were selling for Dh5 million a year-and-a-half ago are now selling at Dh15 million.
“There was a time when the volume (number of units to a project) was the main priority; that has shifted to top-end products. We expect many branded projects to be launched in 2022. There is already a big demand for these types with buyers looking to buy units of Dh10 million and above.”
Waterfront attractions in Dubai, UAE
Buyers today, especially end-users, are gravitating towards projects that offer the prospect of bigger living spaces, lots of green, and water. For those buyers wanting waterfront properties – but not willing to spend big on a Palm address – there is the Dubai Water Canal. Recent weeks have seen pricey off-plan launches from Saudi developer Dar Al Arkan alongside that stretch of water, while at its Riviera project, Azizi Developments extended the length of the lagoon that will run through it. Whether it is Sobha Realty for its Hartland project or Majid Al Futtaim at its Tilal Al Ghaf residential community, lagoons are proving a big draw with buyers.
Affordable options in Dubai
The attention this year has been on the many Dh100 million and over deals on homes in Dubai. The sentiment among market sources is that it will not take long for the Dh200 million barrier to be broken in a not-too-distant future.
But away from the luxury end, a lot is happening in the more affordable residential space. “Mid-tier locations such as Dubailand (Nshama’s Town Square, Damac Hills, Akoya, Mudon, Reem, Remraam), MBR City, Business Bay and Jumeirah Lake Towers have seen the highest transaction activity,” said Prathyusha Gurrapu, Head of Research and Advisory at Core, the consultancy. “In terms of handovers, Dubailand leads with the highest inventory of delivered units, followed by Jumeirah Village Circle and Business Bay.”
The value-minded property buyer should be checking these locations for a home that comes within their budget. In recent weeks, more offers are being put to market, with sellers sticking to a lower upfront payment and then spreading out most of the instalments after the handover. Residents who are planning to shift from rented premises to their own homes are using these payment options to good effect.
“The Dubai residential market continues to be led by end-users driven by the raft of social and economic reforms along with the lowering of interest rates,” said Gurrapu.
This is where all the visa changes are most apparent, with the granting of long-term residency lighting a spark for owned homes. “Unlike part Dubai/UAE property market booms, this one is not confined to wealthy investors and end-users buying homes,” said a developer. “A bigger base of residents finally got into the property market, that’s what is different.”
The best part is that these mid-tier locations are unlikely to see the sharp price increases experienced by more upscale areas. This is because these affordable locations will see more buildings and apartments handed over in 2022, there is sufficient supply to keep any value increase in check.
“Affordable districts such as Dubai Sports City, Discovery Gardens and Dubailand have seen no changes in year-on-year sales values,” said Gurrapu.
Potential buyers however need to track interest rate movements – early next year should see mortgages getting costlier.
What property developers and experts in UAE have to say
End-user market in Abu Dhabi, Dubai and Sharjah
It was end-users and first-timers who were making their presence felt in Abu Dhabi and Sharjah. All of Aldar’s releases through 2021 brought on board those who were buying a home for the first time, many being young UAE Nationals. The same was true at the developer Arada’s latest releases in Sharjah: younger buyers, including expats, were buying a home in the emirate for the first time.
Ziad El Char, Vice-Chairman of Dar Al Arkan Properties that launched two back-to-back projects in Dubai, said: “Definitely, new buyer profiles are coming into the market now, mostly from Europe. It’s not just the same investors who bought before adding to their property assets here.
“A lot of what the UAE and Dubai did to handle the pandemic is a factor influencing investor decisions to come here. In our sales, we are seeing and hearing a lot of that.”
A third category: holiday homes in Dubai
Another boom factor has been the big comeback staged by holiday homes in Dubai. After being on the back foot for a good 16 months, the last quarter of 2021 saw a welcome return to form. All available ones are feeding into the demand from those wanting short-term stays and, this month, those wanting to be in Dubai for the end-of-year celebrations or rest.
Landlords have been diverting their homes from long-term leases into the short-stay market. Those with upscale apartments and homes in Dubai’s priciest destinations: the Palm, Bluewaters, Dubai Marina and JBR. In short, anywhere near a beach or a spot from where to observe the skies lighting up to mark the New Year.
Even after the New Year and the Expo run, the feeling is that short-stay and holiday homes will maintain fairly high demand. A new generation of residents coming to Dubai will likely make do with a short-term rental before moving into a longer-term lease. More corporates are flying in their executives and placing them in these units rather than staying at a hotel.
2022 property demand in Dubai, Abu Dhabi, Sharjah
Each of the last three months set new records for the highest property sales in Dubai. In Abu Dhabi, Aldar’s sales numbers from all of its recent launches have been robust. In Sharjah, Arada and Majid Al Futtaim backed Al Zahia residential communities are plugging into steady demand.
UAE’s real estate sector closes in 2021 in its best form since 2015. More developers are readying their off-plan returns, encouraged by the response others have been getting for their recent releases.
Can 2022 turn out to be another breakout year for the property? “No one can predict the future, but it looks like the market will continue to increase,” said Kuznetsov. “Almost all developers are planning to make record sales in 2022 and have their best year on record.”
It is unlikely then that property values in the mid-tier category can stay immune to any demand rise. By April 2022, a better indication of what’s trending will be available. That will include rental trends as well, with some popular neighbourhoods in Dubai already seeing a pickup in demand and rents.
For those residents keen on buying a home, that would be a good time to decide whether to buy or keep renting. But don’t expect too many bargains.
Record-breaking property run in Dubai
Between August to end of November, property deals in Dubai hit new all-time highs for each of the four months. Even though developers were yet to get busy with launching new off-plan projects.
It didn’t matter as property buyers – a sizeable number of the residents or newcomers to the city – were picking up ready homes or soon-to-be-completed units. More living space was what they wanted and they made sure they were getting it – at the earliest.
“It’s interesting to note that November 2021 had the highest amount of sales transactions since Expo 2020 was announced in December 2013,” said Lynnette Sacchetto, Director of Research and Data at Property Finder.
In this current buying spree, earlier market worries about developers finishing tens of thousands of homes getting completed in Dubai and with no buyers for them. Oversupply is the last thing on anyone’s mind these days.
December numbers should provide further proof of that.
Investors and end-users are buying property in UAE
In the first half of 2021, it was end-users who were in the midst of the buying activity. After all the changes brought about by the pandemic, the wealthier resident-tenants in the UAE made up their minds to buy bigger homes. Villas were their first choice, and just about every listed unit was swooped up.
By August, the buyer mix started to change, and investors were back in the fray. That was when the full impact of the UAE reforms on visas started to resonate with global buyers.
“We see the same interest from both sides - there is a little bit more interest from end-users because they can see that the master-developments are taking shape and will be delivered,” said Nikita Kuznetsov, Founder and Partner, Metropolitan Group. “Both investors and end-users are buying at the moment, which is one of the reasons why off-plan projects are selling very quickly.”
Boom time in Abu Dhabi and Sharjah
One look at Aldar Properties’ nine-month numbers for 2021 will tell you how good the Abu Dhabi off-plan market is faring. The master-developer recorded robust sales with Dh6.14 billion. If you want to narrow it further, Aldar scored with each off-plan launch they had this year. They launched the hot sequence right from late last year when they became the first UAE developer to launch off-plan projects after the COVID-19 pandemic hit.
Head down to Sharjah, the same is repeated at Arada’s projects, whether it is the urban mixed-use Dh24 billion Aljada project, or the recently launched ‘forested’ Dh8 billion Masaar.
“There was a demand for freehold off-plan launches in Sharjah, and that’s the reason why we came up with Masaar,” said CEO Ahmed Alkhoshaibi in a recent interview with Gulf News. “The off-plan market is back.”
In recent weeks, developers in Dubai are following the same playbook.
The rent versus ownership dilemma in UAE
2021 was about the end-user rush to become a homeowner in the UAE.
If there was a ready villa or townhouse available in the UAE at the “right price”, it was a given that someone out there was willing to buy. In the first six months of 2021, residents who had been putting off their decisions to move out of rented homes into their own were plonking down cash on the spot to get the homes they wanted.
“As seen with a nearly 90 per cent annual rise in secondary market transactions, many end-users have gone ahead with their investment decisions over 2021,” said Prathyusha Gurrapu, Head of Research at Core. “The Dubai residential market continues to be led by end-users driven by a raft of economic reforms along with the lowering of interest rates and loan-to-value ratios.
“Mid-tier locations such as Dubailand (Townsquare, Damac Hills, Akoya, Mudon, Reem, Remraam), Mohammad Bin Rashid City, Business Bay and Jumeirah Lake Towers have seen the highest amount of transaction activity.”
This was only the second time in 10 years that everything was gelling to perfection – demand, property values at their most affordable, people having enough cash on hand, and, where needed, tap banks to access mortgages at their lowest ever.
If residents were not willing to change their status from ‘tenants’ to ‘owners’ this year, the chances are they will not.
Those wishing to remain as tenants can hope to rents remaining subdued during 2022. Yes, there are a few locations that are seeing some hikes, at least in landlord price expectations if not on the tenancy contracts. These increases are limited to super-luxury residential hotspots, where on some choice properties rents have zoomed well over Dh1 million a year.
For the majority of Dubai and Sharjah’s popular residential areas, rents are still 10-25 per cent lower from their 2015 highs. And at other locations more buildings and apartments are being handed over, which should keep rental expectations under check.
That means a few more months for these tenants to decide whether to get onto the property buying ladder or not.