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Upending the conventional wisdom of sitting out uncertain times, Dubai's villas and townhouse market witnessed an incredibly busy summer as property buyers and investors flocked to affordable deals, according to industry stakeholders.
Richard Waind, Group Managing Director at Better Homes, said his firm saw a 270 percent increase in new buyers registering and looking for villas and townhouses in the four months after lockdown compared to the same period in 2019.
"Several people have re-assessed their living arrangements and are now in search of more space and particularly outdoor space," he said. "Although many of these searches could have been speculative, we witnessed a 52 percent increase in the volume of villa and townhouse sales in the same period compared to 2019."
Affordability and desire for more space for safety have been biggest drivers of the surge in demand for villas and townhouses, followed by security of property ownership.
Waind said: "Six years of falling prices have made values attractive to end-users and investors. We were experiencing increased market activity in the first quarter, and since then, buyers have seen interest rates fall by approximately 25 percent, and the LTV requirements for first-time buyers reduced by five percent, which has further helped to stimulate demand."
Searches for villa/townhouses had increased by 58 percent in July 2020 compared to July 2019, according to the Property Finder portal.
Lynnette Abad, Director of Research and Data at Property Finder, said customers are looking for well-established communities with ready properties.
"Nearly 35 percent of all searches for villa/ townhouses [in the four months starting April] were concentrated around Arabian Ranches, Dubai Hills Estate, Palm Jumeirah, Damac Hills, and the Springs," she said.
The villa and townhouse segment have managed to navigate the pandemic crisis better than the traditionally strong apartment segment.
Chris Whitehead, Managing Partner, Luxhabitat Sotheby's International Realty, said: “Even though there have been more transactions on apartments, the segment has seen, on average, 30 percent more decline in the second quarter than the first quarter of 2020. However, for villas, that decline has been marginally less at roughly 10 percent in the second quarter than the first quarter."
This trend has been borne out by Dubai Land Department (DLD) data.
"The number of villa and townhouse transactions as per DLD data for the period from January to August 2020 registered at nearly 4,100 versus 4,870 transactions during the same period in 2019, equating to a decline of approximately 16 percent," said Dima Isshak, Senior Manager, Consulting, CBRE.
In August 2020, the top five developments that recorded the highest volume of sales, according to DLD data, were Dubai South, Villa Nova, Dubai Hills Estate, Arabian Ranches, and Emirates Living.
"The total transaction numbers in those areas accounted for nearly 38 percent of the total villa and townhouse sales in August,” said Isshak.
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Waind said villas and townhouses in the affordable sectors had seen the most significant upsurge in demand.
"Townhouses in Akoya Oxygen, JVC and JVT saw buyer enquiries increase over 200 percent from the first to the second quarter as those in apartments looked to secure a home with outside space. There was a sustained increase in demand and transactions in more established villa communities such as Springs (65 percent) and Arabian Ranches (58 percent)."
Although end-users have driven a large part of the market for villas, Waind said there had been an increase in activity from investors "who understand this shift and are attracted to lower service charges often found in villa communities as opposed to apartments."
"Two and three-bed townhouses between one million and 1.5 million dirhams that offer strong net yields are attractive to investors, " he said.
He also observed that the more established communities such as Arabian Ranches, Jumeirah Golf Estates, and Meadows had seen more activity due to new supply to the market coming from airline pilots who have lost their jobs.
Aditi Gouri, Associate Partner, Strategic Consulting and Research, Cavendish Maxwell said that over the first seven months of 2020, the highest number of villa/townhouses transactions were in Dubai South with 363 transactions. Villanova followed it with 330 transactions, Dubai Hills Estate (260), Arabian Ranches (257) and Emirates Living (204).
She added, "Lockdowns, restrictions, and the new normal had influenced investors to favour villas and townhouses. Apartment buildings, particularly in Business Bay, Dubai Marina and Silicon Oasis, are very crowded, and the tight common and community areas make it difficult to maintain physical distancing," she said.
"There is likely to be a stronger focus on the open space, green areas and community facilities offered within a villa and townhouse communities, as occupiers shift to higher utilisation of, and preference for this space and additional amenities in the current times," CBRE’s Isshak said, adding that approximately 7,000 villa/townhouse units are expected to be delivered each year from 2020 to 2022, compared to around 5,000 units per year for the period of 2017 to 2019.
(Reporting by Hina Navin; Editing by Anoop Menon)
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