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The worst may be over for Dubai’s property market, as signs continue to emerge that prices have hit the floor after months of significant price falls exacerbated by the coronavirus pandemic, an industry source told Zawya.
“We have started to record price gains from November 2020 after four months of prices remaining in a tight range, indicating that the market has reached a bottom,” said Zhann Jochinke, Chief Operating Officer of Cavendish Maxwell’s Property Monitor.
For years, Dubai’s property prices had been on a decline mainly due to a huge supply glut. The lockdown in March last year only heightened the trend, prompting landlords and developers to sweeten their offerings.
However, with developers limiting project launches since the onset of the pandemic, oversupply concerns seem to have eased and the market has seen fewer newly developed quality homes. Buyers are also snapping up ready properties, fuelling the demand in the resale sector.
Besides, government-led incentives, such as the various visas announced recently, coupled with reduced credit costs and changing lifestyle policies are going to attract more buyers, thus further supporting prices.
“Another encouraging insight is a drastic slowing in the pace of the price decline – on a yearly basis, prices have decreased by 3.5 percent in January 2021 which is lower than January 2020 when a year-on-year decline of 12.8 percent was recorded,” said Jochinke.
The Property Monitor Dynamic Price Index, which tracks housing prices throughout 42 key communities in Dubai, showed that prices increased by an average of 1.5 percent in December. By January, prices continued to recover, with the index recording a monthly increase of 1.1 percent.
Overall, prices have moved around 6 percent away from April 2009 lows, with the cost per square foot currently standing at 842 dirhams ($229).
Buyers entering the market today will likely see apartment prices averaging a little over 713,000 dirhams, while townhouses cost around 1.7 million dirhams and villas approximately 2.7 million dirhams.
“The property price recovery in Dubai gathered pace in January, with monthly gains of 1.1 percent recorded at an emirate-wide level,” Property Monitor said in its latest report.
“The property market is increasingly displaying signs of stabilisation with price increases recorded consistently over the past three months, providing further evidence that we reached the bottom of the market in late 2020,” it added.
Price falls
However, this doesn’t mean that there will no longer be further price reductions going forward. The broader trend will be price stabilisation, Jochinke said, but buyers and tenants are still likely going to see prices to fluctuate between 0.5 percent to and one percent. Prices in some developments may continue to appreciate.
The likely winners this year will be villas and townhouses, given the strong demand from investors and tenants, particularly those who are looking for bigger accommodations with private outdoor space. Apartments, including off-plan units, may continue to face pressure.
“2021 will likely be a tale of two markets. On the one hand, villas and townhouses are expected to continue to see strong demand with quality supply restricted. On the other hand, apartments are likely to remain under pressure as people prioritise spacious rooms and ample outdoor space – an offering provided by villas and townhouses,” explained Jochinke.
Other industry sources have said that it will take a while before the property market will recover, indicating that there will be further declines in rents and prices in 2021. According to real estate consultancy JLL, prices in Dubai are not bottoming out this year.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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© ZAWYA 2021
