The Dubai property market saw transactions return to pre-pandemic levels in September, with 3,735 sales recorded, second only to March this year. This mirrors a trend seen across the world as demand for property has soared, with buyers reassessing their living spaces post lockdown and placing a higher value on their home. Desire for outside, office, and larger living spaces have driven markets globally and Dubai is no exception. While total transactions in Q3 remained 18% lower than in Q3 2019, the upwards 65% YOY trajectory of new reservations in Betterhomes would suggest we could expect completed transactions in Q4 to outpace last year.
Off plan sales have borne the brunt of the pandemic, with sales dropping 44% YOY. This is largely due to a lack of new releases by developers. However, notable releases such as Tilal Al Ghaf were welcomed by the market and sold out within days, suggesting strong demand for unique and well priced projects.
The most striking shift in the market has been towards end users looking to purchase villas and townhouses. The DLD reported a 109% increase in villa sales compared to summer 2019, while Betterhomes recorded an increase in villa sales of 264%. Crucially, the percentage of villa buyers identifying as an end user shifted from 12% last year, to 76% in 2020 as the domestic end user market came to the fore.
Group Managing Director, Richard Waind, said, “The summer has been an exceptional period for the domestic real estate market. Without the usual annual exodus of expats during the hot summer months, there were far more decision makers in town which drove activity in the end user market. Buyers in Dubai have been driven by the same emotional factors as elsewhere post lockdown, but they have found in Dubai a unique value proposition where prices today are at a 10 year low and the cost of borrowing has come down considerably in the last 9 months. Well established villa communities have seen a particularly high increase in demand, and with availability of homes in these areas now reducing, we are experiencing localized price increases.”
The number of tenants registering for leasing increased by 45% in Q3 2019, but actual new leases agreed in Betterhomes was fractionally back year on year, which would suggest many tenants shopped around in the market before renewing with their current landlords, often with a reduced rent. Lack of new influx of residents coming into Dubai, and recent supply of new apartments, has continued to put occupancy rates and rents under pressure and that is likely to continue while global travel restrictions remain in place. Landlords are offering greater flexibility in terms of payments, with 50% of all landlords now accepting four or more cheques, and only 22% of tenancies renting with the traditional one cheque.
Supply of new properties during the pandemic has come under what was expected in January. Approximately 19,000 new units have been handed over so far in 2020 and we expect roughly a further 10,000 before the end of the year. With current prices offering little incentive to developers to build, we might expect peak supply to be passed in the next 12 months.
Finally, Waind commented, “While the future of all markets remains uncertain due to the ongoing pandemic, the Dubai real estate market has shown great durability during this time. Activity in September and October suggests it is not running out of steam any time soon. Our market is not facing the cliff edge scenario of other countries once government protections such as wholesale furlough schemes are removed, and there are positive signs that the Dubai economy is recovering faster than expected. We welcome the recent announcements on Retirement Visas and Remote Working Visas and believe these initiatives will have a positive long-term effect on the market. Dubai is unique in that we have 6 years of price correction built in to today’s values. While local investors and end users have awoken to that opportunity, I would expect demand to increase further once travel restrictions lift and Dubai is once again opened up to global investors.”