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The UAE’s property market will likely see a decline in overseas buyers due to the coronavirus outbreak, according to the latest analysis.
However, any economic impact as a result of the pandemic will be offset by the government’s stimulus package and ample foreign currency reserves, as well as a boost in local demand, analysts at real estate consultancy firm Savills Middle East said on Thursday.
“There is a possibility that the market may witness a slowdown in demand from international investors due to restrictions in travel,” said Murray Strang, head of Dubai office at Savills Middle East.
The coronavirus that started in Wuhan, China in late December, has now spread to every continent, infecting more than 219,000 people worldwide.
The health crisis, declared as a pandemic by the World Health Organization (WHO), is threatening to bring the world’s economies to their knees, with the numerous lockdowns, flight restrictions, and school and public venue closures taking a huge bite into companies’ bottom-lines.
Among the worst hit are businesses in the travel, hospitality and retail industries, as millions of consumers stay in the confines of their homes. Hotels are already seeing a huge slump in occupancy rates, while airlines are grappling with mounting aircraft groundings.
‘Strong’ transactions
As for the real estate sector in the UAE, things are still looking good, with January and February alone seeing “strong” volumes of residential transactions, according to Savills.
“The real estate sector in the country has remained largely resilient during the first two months of 2020,” said Murray Strang, head of Dubai office at Savills Middle East.
According to Savills’ data, there were 3,880 off-plan transactions during the first two months of the year. Last Wednesday, the day after the UAE government halted the issuance of new visas and cancelled the ones that were recently issued, property transactions reached 503 million UAE dirhams, according to the data shared by Dubai Land Department.
“The exact impact of COVID-19 is unknown, but any disruption to the real estate markets is likely to be a near-term delay or a knee-jerk reaction, rather than a fundamental downturn over the long term,” added Richard Paul, head of professional services and strategic consultancy for Savills Middle East.
He said that while it is inevitable that the overall economic growth, as well as tourism, high-street retail spends will be impacted, there are “longer-term outtakes” worth highlighting, such as accelerating trends with flexible working, high e-commerce spends and improving supply chain.
“The strong fundamentals of the local economy, including foreign currency reserves of more than 405 billion UAE dirhams, and monetary measures introduced by the central bank, will help weather any economic slowdown by the pandemic,” Paul said.
Strang noted that demand “across the residential sector” already increased in 2019, and with a further relaxation in loan-to-value (LTV) ratios, investors will be encouraged to enter the market.
“Banks will likely step up their exposure to real estate and the construction sector, a spike in re-mortgage activity may also be witnessed in the coming months due to attractive borrowing rates and other promotional discounts,” he said.
And, as property prices will continue to soften and more units will come into the market over the next few months, end users in the UAE will be encouraged to upgrade their homes.
The UAE government rolled out recently a $27 billion economic stimulus package aimed at containing the impact of coronavirus outbreak. The stimulus consists of 50 billion UAE dirhams ($13 billion), which will be released through “collateralised” loans at zero interest, and 50 billion ($13 billion) freed up capital from banks’ buffers.
(Reporting by Cleofe Maceda; Editing by Mily Chakrabarty)
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