Reasons why investors are returning to Dubai property market

Number of buyer occupiers, who used to dominate sales, has dropped

  
High-rise buildings along Sheikh Zayed Road at sunrise. Image used for illustrative purpose.

High-rise buildings along Sheikh Zayed Road at sunrise. Image used for illustrative purpose.

Getty Images

Dubai’s property market is now driven by investors who are looking to benefit from high return on investment (ROI) and rising rents, a new report showed. 

When pandemic restrictions eased last year, buyer occupiers, including tenants looking to take advantage of low prices and mortgage interest rates, dominated the sales transactions.  

However, towards the end of 2020, the dynamics started changing, with investors representing more than half (51 percent) of the sales during the third quarter, according to an analysis from Betterhomes. 

The trend has continued this year and as of the third quarter, a huge chunk of the properties was sold to investors, which accounted for 62 percent of the buyers, up from 51 percent a year ago. Buyers who identified themselves as occupiers represented only 38 percent of the transactions, down from 49 percent in the same period last year. 

“Q3 2021 has seen a move in the market towards investors, both locally and internationally,” the brokerage firm said in its report.  

“Strong ROI, rising rents and Dubai’s COVID-19 recovery fuel investor demand again, and we can expect that to continue.” 

Rising values, rents 

Dubai’s capital values, particularly in the villa segment, have been surging on the back of strong demand from both local and international buyers. As of September 2021, capital values of villas went up by more than 20 percent, according to ValuStrat. 

Rents have also been inching up, although the rates for many apartments are still lower compared to the previous year. According to Asteco, overall villa rents registered an increase of 10 percent during the second quarter of the year compared to a year ago, but average apartment rental rates “remained in contraction at 3 percent.” 

Mortgage purchases 

In its report, Betterhomes also noted that while cash buyers continue to dominate the market in the third quarter of the year, it has seen an increase in the number of mortgage purchases, as buyers take advantage of low interest rates. 

As of the third quarter, cash buyers accounted for 63 percent of the transactions, down from 70 percent a year ago. On the other hand, mortgage-based purchases represented 37 percent of the deals in Q3 2021, up from 30 percent in the same period last year. 

(Reporting by Cleofe Maceda; editing by Seban Scaria) 

Cleofe.maceda@refinitiv.com 

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here

© ZAWYA 2021


More From Real Estate