Dubai's residential capital values could stabilise in 2021: ValuStrat

Although prices have a long way to go to reach previous peaks, international investors are expected to return

Image used for illustrative purpose. Dubai skyline and architecture modern and fast growth of a business city.

Image used for illustrative purpose. Dubai skyline and architecture modern and fast growth of a business city.

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As developers in Dubai put new projects on hold, rents and capital values in established villa locations could stablise and perhaps see gradual appreciation in 2021, according to a UAE-based consultancy.

The economy is expected to improve, subject to the resolution of the COVID-19 health crisis. With the Dubai Expo and the 50th anniversary of the UAE, market sentiment could pick up and gradually bottom out during 2021, according to ValuStrat. Apartment prices could follow suit towards the end of 2021, it said.

In the fourth quarter of 2020, Emaar Properties said it had suspended the launch of new projects, including the five-star Creek Palace hotel as the pandemic exacerbated the property slump.

Capital values have already risen marginally towards the end of 2020, particularly for villas, Haider Tuaima, head of real estate research at ValuStrat, told Zawya.

“Current FY 2021 forecast citywide averages, 0-3 percent for villas and 0-1 percent for apartments. Some areas could perform better or worse than others,” he said.

He said currently most of the demand is domestic and GCC driven, although, as restrictions on movement ease, more international investors are expected to return to the market.

However, prices have a long way to reach previous peaks, he added.

According to a recent report by real estate consultancy, JLL, as of the last quarter of 2020, Dubai and Abu Dhabi have a combined residential stock of 860,000 units. An additional 68,000 units are expected to be delivered this year, of which 53,000 are in Dubai.

Office rents to bottom out

Meanwhile, office capital values and rents are also expected to bottom out after reaching 10-year lows as new government initiatives and reforms attract foreign professionals into the country.

The UAE also reformed its commercial companies' law and annulled the requirement for some onshore companies to have an Emirati shareholder, which is expected to boost foreign direct investment in the country, it added.

Approximately 1.3 million sq ft of gross leasable area (GLA) of workspace is up for delivery in 2021, according to Valustrat.

In the retail space segment, malls and shopping centres could continue to face downward pressure as retailers move to digital trading.

“Establishing a strong e-commerce presence will remain as one of primary strategic move for major retailers including F&B consortiums,” the report said.

For 2020, the residential capital values in Dubai for December registered a 13.8 per cent drop compared to the previous year, standing at 65.3 points. It fell 0.1 per cent on month-on-month basis, the lowest rate of decline in three years, ValuStrat’s report noted.

With limited new project announcements, record low prices, and increased mortgage loan-to-value (LTV), the fourth quarter ready-to-move-in home sales transactions were highest in eight years.

Annually, the valuation-based index was 13.8 percent lower than last year. On a citywide level, capital values of homes approached stabilisation at the end of 2020, as the downward trend of recent years currently appears to be coming to a gradual end.

(Reporting by Brinda Darasha; editing by Seban Scaria)

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© ZAWYA 2021

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