In Dubai, the COVID-19 pandemic has caused quite a shift in demand towards bigger homes with balconies and more open spaces. As a result, residents, especially families with children, now prefer low-cost apartments and villas in areas with more suitable services and facilities. Particularly, as many people were forced to stay at home during the pandemic. So bigger residential units have become attainable for people earning an income within a mid-income bracket.
So in response to these challenging market conditions, some developers have introduced a few attractive payment options, such as rent-to-own schemes. This allows tenants the opportunity to become homeowners over a period of 10 years by allowing them to pay rent towards ownership without having to make a down payment.
Such schemes coupled with the UAE Central Bank's new encouraging measures, such as a 5% increase in loan-to-value for first-time home buyers, have assisted tenants in their efforts towards owning property.
In addition, online real estate viewings have become quite a popular technological trend, especially during the pandemic. It’s helped to facilitate the sale and rental transactions within the real estate market in Dubai and other foreign countries amid hesitation to travel. Also, despite the declining rents and sales in Dubai, the overall revenue is still holding steady and this makes this particular emirate an even more attractive investment option for foreign investors.
The Q3 2020 property market report has also witnessed a geopolitical turning point in the form of a peace agreement between the UAE and Israel. This agreement is expected to have a positive impact on the real estate market since Israeli investors who have not been able to participate previously can now do so.
So the UAE’s real estate market will now be able to capitalize from such attractive investment opportunities that the real estate market of Dubai and the UAE has to offer.
Property Monitor has also reported that, according to both the property reports of Q3 219 and Q3 2020, average housing prices in Dubai have decreased by 11.7% annually. In addition to this, housing prices in Dubai dropped by a further 4.6% quarter on quarter.
Furthermore, the property market report of Q3 2019 has indicated that average apartment rents in Dubai dropped by 15.9% annually compared to the report of Q3 2020, which dropped by 5.9% on a quarterly basis. As for villas/townhouse rents, these declined by 8.9% from the previous year to 2% quarter on quarter.
So the property price decline that had already been happening in Dubai over the past several quarters was further worsened when the COVID pandemic hit, as it impacted the demand for real estate in an already oversupplied market. In addition, Property Monitor data shows that property prices in September stood at USD 224 per sq ft, which was just below similar rates that were recorded in January 2009. Also, as of September 2020, these figures were 33.3% lower than during the market peak in September 2014 and only 4.8% lower than the previous market decline in April 2009.
Gross rental yields have remained fairly stable at about 6%, indicating that rents have declined in line with property prices. So as a result of this, an abundance of real estate options has now become available at more affordable prices allowing more tenants an opportunity to relocate to larger spaces and/or better communities. Moreover, many tenants are becoming property owners by taking advantage of the favorable interest rate and the increased loan-to-value (LTV) ratio applicable to mortgages for first-time buyers which was introduced earlier this year.
Furthermore, the property market report of the Q3 2020 only saw 8,511 real estate transactions compared to that of Q3 2019 report, which saw 10,374. So a marked decrease of 17.9% is noticeable here. However, a significant increase of 56% in real estate transactions was recorded in the property market report of Q3 2020 compared to that of Q2 2020’s report of only 5,469 real estate transactions. So this reflects a further recovery in the real estate sector after the temporary COVID-19 restrictive measures in Dubai.
Following the lift of movement restrictions in the second quarter, transaction activity gained momentum in the subsequent months. The number of transactions in August was 2,462, which was relatively strong compared to other August periods. The point is, that historically, August has always been a slow month for transactions, as it is the peak of summer in Dubai and many residents and citizens travel abroad, while tourists wait for cooler months to visit the UAE. Low interest rates continued to drive mortgage transactions during the given period, including initial mortgages as well as refinancing.
In the Q3 2020 property market report, a total of 2,892 secondary apartments was transferred, while off-plan apartments sales totaled 1,999. The overall number of villas/townhouses transferred was 1,699 and off-plan villas/townhouses transferred were 752.
Dubai still has a plentiful supply of housing. however, a shortage of inventory is notable in certain popular districts. For example, demand outpaces supply in such well-established villa and townhouse communities as Jumeirah Golf Estates, DAMAC Hills, Jumeirah Islands, and Arabian Ranches. The pace of price decline in such communities has significantly slowed over the past months, with some even registering marginal increases.
Many measures have been taken by the UAE government to protect citizens and residents from the spread of the virus during the pandemic. But as construction is a vital sector of the country's economy, it was exempt from the lockdown restrictions and construction sites were permitted to continue work. Only a few projects were put on hold, so about 16,400 units are scheduled for delivery in Dubai by the end of 2020.
Abu Dhabi’s residential property market remained under pressure due to the COVID-19 situation, which resulted in the economic slowdown that began in 2014 with the decline of the oil prices. Consequently, the lowered business activity in the emirate has impacted jobs, which in turn resulted in reduced housing demands. So job losses and readjustments of employee benefits packages, such as housing allowances have been the main factors that have affected the Dubai real estate market overall.
In addition, the Q1 2020 property market report has indicated that average sales prices for apartments have dropped by 5.6% in Abu Dhabi’s major residential zones compared to that of the sales prices for the Q3 2020 report. Also, villas/townhouse sales prices declined by 5.3% over the same period.
According to the Q3 2020 property market report compared to that of the Q1 2020 report rents for apartments and villas/townhouses in Abu Dhabi have dropped as well. The average decline for apartments was 6.1% and for villas/townhouses 6.2% for villas/townhouses, respectively.
Furthermore, to soften the impact of the COVID-19 situation on the real estate market in Abu Dhabi, the Department of Municipalities and Transport (DMT) has launched several initiatives. This includes exempting individuals and companies from paying 34 real estate registration fees until the end of 2020. As a result, the DMT statistics indicate that the value of real estate transactions in Abu Dhabi has increased by 34% and has reached USD 1.7 billion by the end of April 2020. In addition, over 2,600 real estate deals were signed during this period in comparison to the 1,840 real estate deals which were valued at USD 1.2 billion during the same period last year. Also, 60% of the total real estate transactions in April 2020 were 1,170 mortgage transactions valued at USD 1.03 billion compared to 598 mortgage transactions valued at USD 517 million recorded in the same period of 2019.
What’s more, Yas Island had the highest value of the total real estate transactions in April 2020 amounting to USD 209.9 million. This is followed by Al Reem Island with USD 75.9 million.
Additionally, Abu Dhabi also has the following areas that offer very profitable real estate, namely: Saadiyat Island where the property is valued at USD 73.5 million, Al Reef with the where property is valued at USD 69 million, and Al-Faqa with where the property is valued at USD 43.2 million.
Abu Dhabi’s upcoming real estate supply for 2020 is estimated to be over 6,100 for apartments and 450 for villas/townhouses. However, the actual number of residential units constructed might appear to be lower, due to project delays and phased delivery by developers.
The Q3 2020 property market report indicates rents across the northern emirates continued to decline, which is the trend that has been seen over the previous quarters.
Taking advantage of this decline residents upgraded their residential units and moved to larger spaces. As a result, this saw landlords of apartments in the northern emirates experience more pressure since they had to increase supply to meet this demand. In addition to this, the falling rental rates in Dubai have also made this more affordable for tenants. As such, tenants are now able to negotiate their rents at a lower price.
Furthermore, real estate agencies and landlords have also taken multiple steps in trying to attract tenants and reduce the financial burden on them from the pandemic. Among several incentives they have offered are an extension of contracts, free months on new leases and exemption from various fees, and any penalties.
According to the Q3 2020 market report, the average rental price in Sharjah remained under pressure due to the COVID-19 pandemic.
Despite this though, it was the increasingly affordable rates that helped facilitate real estate transactions. In addition, the Sharjah Real Estate Registration Department (SRERD) reported that the emirate recorded up to 28,710 real estate transactions to the value of USD 1.6 billion in the first half of 2020. Furthermore, Q3 2020 property market report also indicated a 10% rise in real estate transactions compared to the same period in 2019, with the number of real estate transactions amounting to over 14,850, which is valued at USD 1.2 billion.
The Q3 2020 property market report indicated a noticeable drop in rental prices in Ajman, which has encouraged tenants to upgrade their residential units for better quality and more space.
Furthermore, the Ajman Department of Municipality and Planning has introduced the Visual Communication Service (Gareeb) to help carry on with real estate operations during the pandemic while protecting client health during the COVID-19 pandemic.
The Q3 2020 property market report has indicated that the annual rent for apartments in Umm Al Quwain ranges from 2,722 per annum for studios to 7,350 per annum for three-bedroom apartments, depending on the property location, age, condition, and specification.
In addition, according to the Ras Al Khaimah Municipality Department, the total value of sales transactions in the Q2 2020 report was an estimated USD 42.5 million. This is in comparison to the Q1 2020 report of an estimated USD 56.5 million, which indicates a drop of real estate transactions by 25% on a quarterly basis. This significant drop was caused by many factors, including the movement restrictions in the early stages of the pandemic, job losses, and uncertainty about the timing of a market recovery. However, it was reported that real estate transactions in July reached an estimated USD 29.4 million, which represents a good start for the third quarter of the year.
Furthermore, the Q3 2020 property market has also indicated that in Fujairah, the annual apartment rent ranged from between 3,539 to 7,623 per annum for studio apartments. Whereas, for three-bedroom apartments rent ranged from 7,623 to 9,801 per annum. These figures were also found to be based on and influenced by the property’s location, age, condition, and specification.