Dubai’s apartments are poised to lead the next leg of property market recovery this year, as the supply of villas in the emirate is beginning to dwindle, an analyst said.
Dubai’s real estate has started to recover since prices bottomed out in November last year. But the positive performance has been dominated by single or detached homes, as well as rowhouses. Apartment sales, on the other hand, have been quite slower to recover.
The trend is expected to shift over the short term, especially since Dubai is set to welcome tens of thousands of visitors every month starting October, and new villa listings are slowing down.
“Over the coming months, expect apartment prices to climb, and with Expo 2020 only a couple of weeks away, the expected influx of tourists and would-be investors is sure to increase interest in this segment, particularly the AED 1 to 3 million ($272,000 to 816,000) price range,” Zhann Jochinke, COO of Property Monitor, told Zawya.
“Apartments are now just starting to see price appreciation across the wider market. As the rapid price appreciation of villas and townhouses has priced out some prospective home buyers, many are likely to reconsider apartment living and buy now to avail [themselves of] favourable lending conditions and secure good deals,” he said.
Villas and townhouses posted an annual price increase of 23 percent during the second quarter of the year, outpacing the price growth of 6 percent in the apartment category, according to Asteco.
As of June 2021, approximately 6,650 apartments and 1,500 villas were completed. While new supply has indeed slowed down as a result of recurring COVID-19 restrictions and delays, Asteco said, it still “presents a significant volume”.
Emaar and Majid Al Futtaim are busy developing huge villa and town house communities such as Arabian Ranches III and Tilal Al Ghaf, respectively. But these communities will not be fully ready in the market at least until early 2023.
Jochinke explained that the current recovery in the market has partly been “precipitated” by the pandemic mobility restrictions that initially led to a surge in demand for private outdoor space with a move away from high-density living. The demand led the initial recovery in the villa and townhouse segments.
“As quality inventory runs out in villas and townhouses… the apartments segment is set to pick up the baton for the next leg of recovery,” Jochinke noted.
“The recovery has been slower [in the segment], but with the oversupply that was built up during the market downturn now starting to be absorbed, and fewer new project launches occurring, prices will rebound.”
Overall, property prices in Dubai rose for the tenth month in a row in August, rising by 16.2 percent since November 2020. Property Monitor had said in its recent report that there is still room for an additional 20 percent increase in property values from current price levels.
In August, prices averaged 956 dirhams ($260) per square foot, an increase of 1.6 percent compared to the previous month and 18.5 percent compared to a year ago.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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© ZAWYA 2021