Positive growth trajectory for Dubai's real estate market

Positive growth trajectory for Dubai's real estate market

Tuesday 05 April 2022Wed 16 Feb
Positive growth trajectory for Dubai's real estate market

2022, The Year of the Tiger or in the world of Dubai real estate market, 2022 will be known as the year the developers came roaring back. 

To understand how this came to be we have to look back over the past couple of years. It's been almost two years since Covid lockdown was placed upon the residents of Dubai. The period that followed was filled with uncertainty and trepidation globally and no more so than with the developers of Dubai.

As Dubai eased it's way out of lockdown in a cautious yet sustainable manner under it's visionary leaders, developers took a 'wait and see' approach. Prices in the secondary market, already at the bottom of a six year cycle, took a momentary plunge as a result of job losses in certain industries affected by the pandemic. Whilst this was not a normal market, it was definitely not the climate in which to launch new projects. 

However, this did not mean developers were dormant, construction sites across Dubai remained active and developers were still busy planning projects for the future with a focus on sustainability and smart technology whilst also planning communities for a post covid lifestyles where people would work from home.

As normal life resumed in Dubai, the volume of secondary transactions rose towards the back end of 2020 and continued to soar throughout 2021 with the Dubai Land Department (DLD) announcing record number of transactions. As secondary transactions rose, so did the prices. There was a renewed confidence in Dubai both domestically and internationally, this confidence was bouyed by the attitude and actions of the leaders of Dubai who saw the pandemic as an opportunity to thrive rather than just survive.

We saw the prompt decision to postpone Expo2020 for twelve months, the announcement of the Dubai 2040 Urban Master Plan, the implementation of changes to visa programmes and 100% company ownership, the successful rollout of the vaccination programme and DLD's introduction of fractional ownership. Dubai was back stronger than ever. Developers sensed this and began not only launching but selling out developments in record times.

I have always likened the relationship between developer sales and secondary sales to the pendulum of a clock, swinging from one to the other. When secondary prices are low, developers, hesitant to reduce prices, get creative with their offers and include; DLD waivers, service fees waivers, post-handover payment plans and even guaranteed returns for fixed-term periods.

Evidence that the pendulum has swung back towards developer sales is clear. In January 2021 71% of DLD transactions were Title Deed transactions compared to December 2021 which was 54%. According to Propertyfinder data, month on month from October 2021 to November 2021 there was a 6% swing in favour of primary sales. It's only a matter of when rather than if primary sales will reach parity with secondary sales.

What is most encouraging is that Dubai is no longer just seen as an investor market or a place for HNWIs. Whilst the prime and super prime market has witnessed some incredible results and growth in the past 18 months, there has also been a rise in first time buyers now availing of 80% LTV (loan to value) mortgages and payment plans and offers from developers. Residents are looking at Dubai as being their home for the mid to long term rather than the typical short to mid term. They are buying across all segments and no longer only in prime locations.

The levels of launches of new projects planned for 2022 are reminiscent of 2016 / 2017. One of big differences I have already noticed in the past year are the products being offered today are vastly superior than ever before; better thought out floor plans, more contemporary finishes in touch with global trends and increased amenities and facilities for the residents to enjoy. Today developers need to offer something that is not readily available in the market and it's genuinely refreshing to see the products now being offered.

We live in the age of information being available at the touch of a button. Today's consumer is more educated than ever before making informed decision based on data. Mo'asher, an initiative of Dubai Land Department in cooperation with Property Finder, releases a monthly report of Dubai's official sales-price index. Again, another step towards transparency in an ever maturing Dubai market. Buyers know what they want and recognise value for money when they see it.

Dubai as a city continues to demonstrate value for money per sq ft on a global scale. This hasn't gone unnoticed and I expect that international buyers across Europe, UK, Canada and Russia amongst others to continue to grow.

Dubai 2040 Urban plan is the seventh development plan for the emirate since 1960. Between 1960 and 2020, the population of Dubai has multiplied 80 times from 40,000 in 1960 to 3.3 million and the expected population growth will exceed 5.5 million. Areas highlighted include Deira and Bur Dubai, Downtown and Business Bay, Dubai Marina and JBR, and two new centres - Expo 2020 Centre and Dubai Silicon Oasis Centre

There has also been a surge in branded residences globally in the past decade. According to a Saville Branded Residence global report (2021) the U.A.E. ranks 3rd in the world whilst the number 1 city is Dubai, ahead of Miami, New York, Phuket, Bangkok and London. This popularity is set to continue in Dubai with developers collaborating with leading global brands from hospitality (Emaar / St. Regis, Select Group / Six Senses and the iconic Za'abel One / One&Only), fashion (Emaar / Elie Saab, Dar Al Arkan / Missoni) and luxury cars (Emaar / Lamborgini, Dar Al Arkan / Pagani) to name but a few. 

My thoughts for what lies ahead are that prices will continue to rise due to supply chain issues, inflation but more importantly demand. Even with the expected interest rises to be implemented in the year ahead we have already noticed increases in rents across many communities which encourages investment in the Dubai real estate market.

One word of caution to developers is to continue offering value for money homes and communities that enhance the quality of life that aren't available in today's market and in times of high demand to resist the temptation to withdraw offers like DLD waivers and/or post handover payment plans which could result in the pendulum swinging back towards the secondary market.

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