Further fall in UAE rents? More than 50,000 new apartments, villas expected in 2021

Property firm Asteco says medium to long-term outlook is 'encouraging'

Image used for illustrative purpose.

Image used for illustrative purpose.

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With more than 50,000 new apartments and villas expected to be delivered this year, the housing oversupply problem and the ongoing uncertainty due to the new COVID-19 restrictions will continue to challenge the UAE property market this year, according to a new Asteco report.

“The supply-demand imbalances is likely to worsen over the course of 2021,” the consultancy firm said, citing that supply levels are rising while demand remains curtailed amid  the exodus of workers affected by job cuts and downsizing of several businesses impacted by the pandemic.

Given these pressures, Asteco said, it is likely that rental rates will decrease further, while demand for office space will remain subdued on the back of continued remote working trend.

“There have been a number of positive reports suggesting that the economy is slowly moving into a recovery phase. However, given new lockdown restrictions in many parts of the world, it is widely perceived that the full economic impact and the pace of recovery is still uncertain,” Asteco said.

The UAE property market has been impacted by the coronavirus pandemic, particularly at the height of the global lockdown last year. The pre-existing oversupply problems didn’t help and both sales prices and rents continued their declines throughout 2020.

Analysts are split as to when the market will start to recover. While some are optimistic because of the massive COVID-19 vaccine distribution, as well as the hosting of World Expo in Dubai later this year, others are sceptical about an early rebound due to the lingering impact of the pandemic.

Supply concerns

Asteco estimated that Dubai and Abu Dhabi will see the delivery of additional 41,500 and 15,000 residential units, respectively throughout this year.

In Abu Dhabi, the majority of the upcoming supply will be located within the investment zones, as well as in Saadiyat Island.

However, Asteco said some projects in the UAE capital might face some delays this year and the anticipated handovers will ultimately spill over in 2022.

“The COVID-19 effect globally and subsequently [in Abu Dhabi], is expected to continue into 2021… New and upcoming residential supply during a period of subdued market demand will result in rental rates to decrease further.”


In Dubai, the anticipated 41,500 units could possibly increase if projects that are currently stalled or on hold will resume construction this year.

“With more supply expected for handover in 2021, tenant retention will become increasingly important and can be achieved through competitive rates/ incentives,” Asteco said.

“Further pressure on average sales prices is expected in 2021, albeit at a lower rate of decline, with some developments likely to bottom out and/ or possibly increase / hold in value,” it continued.

Reasons to be optimistic

Despite the negative short-term outlook, Asteco said the medium and long-term outlook for the UAE is more encouraging. This is thanks to a recovery in oil prices, higher gross domestic product (GDP) and pro-active government response and clear focus on economic progress and sustainability.

“Similar to the post financial crisis recovery, the UAE will rebound and continue to manifest itself as a leading land-sea-air multimodal transport hub connecting the Far East with the West, and thus attract human and physical capital with a long-term view on living, investing and doing business in the country” the report said.

(Reporting by Cleofe Maceda; editing by Seban Scaria)


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© ZAWYA 2021

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