The real estate industry is a key pillar of the UAE economy, and it has been going through a correction phase in recent years due to the widening gap between supply and demand.
Leading property developers had been rushing to complete their development projects ahead of Expo 2020, which has now been rescheduled to next year in the wake of the coronavirus outbreak.
The delay of Expo 2020 could be a positive catalyst for the real estate industry, as it will help attract investors for ready residential units in the market. Developers have held on new projects and slowed down the pace of work on existing developments so they will be able to market existing stock to potential buyers ahead of the six-month long mega event, which is expected to attract 25 million people across the world.
The real estate market in 2019-20
In 2019, developers started off with projects that were set to provide at least 13,216 units by the end of the year. However, the actual completion rate with real estate projects is almost 40-50 per cent of that. Therefore, a total of 6,500 units saw actual completion in 2019. The momentum shifted towards the start of the new year and continued the spill over with more than 20,000 residential units completed from January to April 2020.
Developers targeted areas likely to be the most plausible options for the Expo 2020 site. Since the declared event site was more towards the Southern districts of Dubai, projects were launched there.
To be more precise, the following areas saw the most significant focus of development:
1. Business Bay
2. Town Square
3. Downtown Dubai
4. Dubai Sports City
5. Dubai Production City
According to the data pooling in from various property portals and statistic reports, the Jan-April 2020 period saw a rise in the numbers as follows:
1. More than 15,000 apartments
2. More than 3,800 villas and townhouses
3. Over 1,000 serviced apartments
Comparing it with numbers from 2019, it is easy to see that the numbers are exponentially higher than that of January to April 2019. Almost 15,060 residential units in total were completed at that time.
Opportunity for stakeholders
The start of 2020 brought about almost 5,000 residential units available for sale. According to Core's reports, this brings the total number of residential units in Dubai up to 555,000.
This was all in anticipation of the massive influx of visitors the Expo 2020 was set to bring. Although the postponement of the event was unexpected, the launched projects were only going to see completion later this year. This therefore represents a potential opportunity for developers to complete projects and increase inventory ahead of the mega event in 2021.
Furthermore, developers should not slow down their projects, keeping in view the long-term bigger picture of the real estate industry. Dubai has emerged as a competitive and established real estate market and only those who will survive the current situation will be the ones that promote their projects to the right people at the right price at the right time. In addition to public listed real estate giants, some private developers have also been reporting good sales volumes despite the ongoing slowdown in the market because of their better marketing strategies and product offering through an appropriate platform. Real estate in Dubai is a 'Buyer's Market' at the moment and the developers will have to be innovative and competitive to sell their stock.
It's obvious that the market is teeming with residential projects up for grabs, especially with the benefits of off-plan property investment. The coronavirus has forced the whole world on a lockdown, therefore affecting the emirate's tourism and hospitality industries. Although these were one of the main sources of income for the country, the UAE is faring significantly better with lesser cases to show.
In addition to this, the economic stimulus packages and relief programs offered by some of the major companies have provided much needed support. An example would be of the Commercial Bank of UAE's economic stimulus package that increased loan-to-value ratios by five per cent for first-time homebuyers.
Even though the UAE economy is facing a significant challenge, the real estate market will continue to mature. Given the long-term nature of the investment that real estate has always had, it's safe to say the market is going to survive and growth will come back.
Real estate consultants and agents claim their recent clients are in search of bigger living spaces. It seems the pandemic has changed consumer behaviour and made a new demand for villas and townhouses, with numbers of transactions rising.
The date of the Expo 2020 has shifted to 2021 and times are challenging but the desire for people to visit, live and work in the UAE has not diminished.
- Gary Dalton is the managing director at ZoomProperty.com. Views expressed are his own and do not reflect the newspaper's policy.
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