Despite property buying increase in the UAE in recent months, the market is expected to experience further declines this year due to an oversupply of residential units that reached nearly one million by the end of 2020.
However, the sector remains resilient and any short-term fall in performance isn’t going have a significant impact on it, real estate and investment management company JLL said in a report released on Monday.
Demand for housing in the UAE dropped during the coronavirus lockdown that the whole world had to face early last year. It was only after easing of the restrictions, when the situation in the real estate market started to improve.
Low housing prices attracted a flow of buyers to the market during the late part of 2020. November and December were especially successful in terms of sales, breaking the secondary and ready market transactions records for the past seven years, according to Property Finder.
JLL’s report points out, that in the last quarter of 2020 Dubai and Abu Dhabi's combined residential stock amounted to 860,000 units. This year, a delivery of additional 68,000 units is expected.
Last year a total of 39,000 residential units was handed over in Dubai, increasing its supply to 595,000. As for Abu Dhabi, it witnessed 4,000 new units delivered in 2020, so its stock rose to 265,000.
In the years prior to the coronavirus pandemic, the property market in the UAE has been already declining, partially due to a huge supply glut.
As for sale prices and rental rates, Dubai saw declines by 8 percent and 12 percent, respectively in the last quarter of 2020 compared to the previous year. Sale prices and rental rates in Abu Dhabi decreased by 4 percent and 3 percent, respectively.
Further single-digit declines in performance can be expected in the short-term, particularly on the back of an oversupply in the residential market. But the sector is generally defensive, so activity is unlikely to drop significantly. However, it may take a year or two for the market to bounce back and return to pre-crisis levels.
In JLL's opinion, what will help drive the industry forward this year, it's sustainability and tech adoption.