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Dubai’s real estate market is beginning to feel the impact of the pandemic as widespread lockdowns and quarantine measures to stem the spread of coronavirus kept investors away, the latest research data showed.
Off-plan residential sales transactions volume plunged 42 percent in March 2020 compared to February, while residential capital values dropped by 10 percent compared to a year ago, according to a ValuStrat report on Sunday.
Today’s buyers will find homes priced almost the same as in 2012, with the weighted average residential price per square foot dropping to 933 per square foot.
“The COVID-19 coronavirus pandemic began to show its impact during the second half of March, as demand decreased due to the stay-at-home campaign supporting the nationwide disinfection program,” the consultancy firm said.
In a separate analysis also released on Sunday, Asteco said sales price movement for apartments, villas and offices recorded declines of between 11 percent and 12 percent since the first quarter of last year.
While it maintains it has yet to record a “discernible change” in demand or values because the Q1 figures were largely recorded before the pandemic was declared, the real estate agency anticipates further declines.
“It is likely that activity will diminish, at least over the short-medium term,” noted Elaine Jones, executive chairman and founder of Asteco. “Price declines grow increasingly likely in the event of a prolonged economic downturn,” she added.
The deadly virus that was first detected in Wuhan, China in late December has so far infected more than 2.3 million people, overwhelming healthcare systems and crippling economies worldwide. The pandemic has not only caused financial hardships to both employers and workers, but it has also sparked anxiety among investors.
According to analysts, property sales have been impacted as movement restrictions are making it difficult for potential buyers to shop for new homes. The widespread lockdown and quarantine measures imposed by governments worldwide have also kept potential foreign investors away from the UAE market.
“It is understandable that due to travel restrictions, foreign buyers would not be able to access the UAE market. Many local buyers have also put their property investments on hold due to the same lockdown measures,” Haider Tuaima, head of real estate research at ValuStrat, told Zawya.
“The current lockdown means almost a complete hiatus on new sales due to practicalities of viewings, arraying financing and general uncertainty,” Asteco’s report noted.
Experts had predicted that sales prices would either ease or rebound this year, ending a correction cycle that had sent property prices and rents falling. “
Prior to COVID-19 pandemic, the market was on a growth trend in terms of property purchases. For the moment, that trend seemed to be put on hold. It is just too soon to measure what longer impact, if any, the economic consequences of COVID-19 will have on the UAE real estate sector,” Tuaima added.
Experts had earlier predicted that sales prices would either ease or rebound this year, ending a correction cycle that had sent property prices and rents falling.
Home prices in the UAE have been on a decline since 2014 due to a combination of factors, such as a huge supply glut, negative investor sentiment, low oil prices and a strong US dollar.
The government has recently introduced initiatives and reforms to address the supply glut and boost investor appetite. Still, tens of thousands of new flats and villas were scheduled for delivery this year.
Supply
In its latest report, Asteco said new apartment supply slowed significantly in the first quarter of 2020, with the handover of 5,750 units, down from the 8,000 units turned over in the previous quarter.
Office inventory delivered also nearly halved, from 1.25 million square feet in the last three months of 2019 to just 500,000 square feet in March 2020.
Rent
Apartment, villa and office rental values continued to decline, posting quarterly falls of 3 percent, 2 percent and 3 percent, respectively. Compared to a year earlier, the declines were 12 percent, 9 percent and 12 percent, respectively.
Sales
As for sales prices, apartments, villas and offices recorded drops of 2 percent compared to the previous quarter and declines of between 11 percent and 12 percent since the first quarter of last year.
(Writing by Cleofe Maceda; editing by Seban Scaria)
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