Demand recovery in Dubai — prices go up

Demand recovery in Dubai — prices go up

The Emirate's real estate market is forecast to have a strong recovery growth in the second half of the year due to incentive payments, reforms of the visa system and high demand from end consumers and investors

Analysts agree that the residential segment has already passed its lowest point and currently offers good opportunities for developers in the premium real estate sector.

Villas and townhouses show the first growth over the past seven months. The apartments are expected to start an uptrend in the near future.

According to the latest data, despite international restrictions due to COVID-19, more than 8,000 new investors entered the Dubai market in the first half of 2021. Such figures are explained by the gradual transition of Dubai from a tourist destination to a full-fledged and diverse economy with a developed infrastructure.

There are positive migration reforms for foreigners, a large liberalization of the sector and detailed development plans for the Emirate until 2040. This has already attracted more FDI and highly skilled immigrant workers than before.

At the moment, the market is waiting to see how the upcoming world exhibition Expo 2020 in Dubai will affect its development.

Against the background of current events, S&P Global has a positive forecast, counting on more than 30% revenue growth in the sector by the end of this year. The agency's analysts expect the emirate's GDP to grow by 3.5% in 2021 and 2.5 % in 2022.

At the moment, the main driving force is the sector of ready-made residential real estate, which is gradually attracting attention from the commercial and "Off-plan" real estate sector ("Off-plan" is an object bought at the stage of the project or construction process).

Zhann Jochinke, CEO of Property Monitor, reports that the Dubai market has witnessed a gradual increase in prices by 10% over the past seven months, compared with a drop in 2020.

"To date, 2021 has shown an increase in prices throughout the emirate by 8.3%, and I foresee that this growth will continue until the end of the year. However, there are expectations of a slowdown in the trend in the coming months, " Jochinke told the Khaleej Times on Monday.

Jochinke also noted that despite the rather low projected growth rates, the process itself should be stable.

The basis of the upward trend was villas and townhouses in already developed residential areas, where there is a high demand from buyers and a decrease in the number of offers, which allowed sellers to aggressively raise the price bar.

For developing areas, this situation will come in the foreseeable future.

Against the background of how the attention of buyers and investors is drawn to the ready-made real estate sector, the "Off-plan" market (real estate under construction) will have to rely on the ability of developers to provide a sufficient number of new facilities.

The prospects for this sector are not defined, but in the coming years, a slight decrease in the overall pace of construction is expected.

In the end, all analysts point to the importance of Expo-2020 in the development of the market for the next six months or a year. The second important reason lies in the success of the Dubai government in the fight against the coronavirus pandemic.

Nikita Kuznetsov, CEO of Metropolitan Premium Properties, points out in an interview with Khaleej Times: "More and more people are moving or investing in Dubai as a place to buy their second home, due to the positive steps taken by the government in the fight against the COVID-19 pandemic. We have witnessed a surge in the number of transactions for villas and townhouses, and especially high demand for coastal real estate."

Read also