UAE residential communities 'likely to see stability this year'
DUBAI, February 1, 2021
UAE’s property market saw prices and rents of residential communities with superior offerings stabilise during Q4 and this year more communities are likely to display stabilisation in capital values with the successful vaccine rollout, according to Cavendish Maxwell, a leading property consultancy and chartered surveying firm providing services in the Middle East and Africa.
The last quarter of 2020 was an extension of changes that were witnessed during the year, such as upgrading of living spaces or adopting flexible working from homes and offices, said the expert in its Q4 2020 UAE Property Market Report, containing key data and trends for Dubai, Abu Dhabi and the northern emirates.
The report was compiled by the firm’s in-house strategy and consulting team in collaboration with its extensive client and partner portfolio, drawing on proprietary data from real estate intelligence platform, Property Monitor.
Revealing the key insights and trends during the fourth quarter of the year, Cavendish Maxwell, said the average residential property prices in Dubai registered a 4.4 per cent decline over the 12-month period from Q4 2019 to Q4 2020 but grew 1.2 per cent on a quarterly basis.
Average apartment rents declined 16% over the 12-month period from Q4 2019 to Q4 2020 and 4% on a quarterly basis while villa/townhouse rents were lower by 1.7% on a yearly basis but higher by 3.4% from the previous quarter, it stated.
Locations such as Business Bay, Al Furjan and Palm Jumeirah have displayed greater resilience over the quarters and the traditionally sought-after villa and townhouse communities have showcased strong performance since the onset of the pandemic, it added.
Cavendish Maxwell pointed out that a total of 28,255 units are expected to hit the Dubai market in the first quarter of 2021.
Average sales prices in Abu Dhabi’s major residential zones declined by 8% for apartments on a yearly basis and increased by 1% on a quarterly basis. Villa/townhouse prices registered a yearly decline of 6% and a quarterly increase of 2%.
The average rental decline for apartments was 6% on a quarterly basis and 15% yearly. While villas/townhouses saw a 3% yearly decline, rents rose 2% on a quarterly basis. In Q1 2021, 6,193 units are expected to hit the Abu Dhabi market, it added.
On a quarterly basis, rent declines were more pronounced in some of the northern emirates than others. For instance, rents in Sharjah declined over the previous quarter but rents in Ras Al Khaimah were largely unchanged during the same period.
Commenting on the report, Aditi Gouri, head of strategy and consulting at Cavendish Maxwell, said: "The last quarter of 2020 was an extension of changes that were witnessed during the year, may it be upgrading living spaces or adopting flexible working from homes and offices."
"We saw the prices and rents of more residential communities with superior offerings stabilise and even appreciate, while others continued to soften. Upcoming supply continues to be a nagging worry in the new year but decisions by developers to hold off on new launches and efforts by the Higher Committee of Real Estate will likely help restore balance between demand and supply, cushioning prices," he noted.
"In 2021, we expect more communities to display stabilisation in capital values with the successful vaccine rollout further establishing confidence in the real estate sector and the broader economy,” he added.
According to chief economist Julian Roche, investors in real estate markets throughout the UAE have three good reasons to feel more optimistic about the year ahead.
First, Property Monitor data from Q4 2020 has been encouraging throughout the emirates and across virtually all sectors. Second, cautious consensus optimism over a rise in oil prices is reinforced by the widespread conviction that the global economy will begin to recover, as structural economic adaption mechanisms finally start to work.
Both the International Monetary Fund and the World Bank predict a subdued recovery, with economic growth exceeding 4% in 2021. Finally, as one would expect in a pandemic, real estate comfortably outperformed equities last year in Dubai.
Equity shareholders in Dubai ended 2020 almost 10% lower than at the start of the year but the value of residential real estate fell 4.4% in Dubai in 2020 and 7% in Abu Dhabi, according to Property Monitor.
On the office sector, Cavendish Maxwell said the demand for office space in the range of 5,000-10,000 sq ft increased from 25% of total demand in Q3 2020 to 40% in Q4 2020.
Demand from the construction sector was negligible in the latest quarter compared to 20% in Q3, potentially indicating the increasing challenges for the sector as the pandemic raged on, stated the expert.
Business Bay, Dubai Silicon Oasis, Jumeirah Lakes Towers and parts of Downtown and DIFC have seen rents decline on a quarterly basis, it added.
On the other markets, the property expert said in Abu Dhabi the office rents remained largely unchanged on a quarterly basis, while headline office rents in Sharjah have mostly been steady in 2020, largely due to innovative regulations and incentives that have helped ease the uncertainty brought on by the pandemic.
Similar to the office market, extended rent-free periods and capex contributions were offered to attract and secure reliable tenants in the retail segment. Other innovative schemes included providing tenants with turnover-linked rent options. The aim was to keep vacancy levels low and accommodate tenants’ requests of lowering rents or relocating to smaller units as business requirements changed.-TradeArabia News Service
