The real estate sector of Dubai, which recorded a year-on-year rise in the supply of residential units in 2020 despite the disruptions caused by the pandemic, is expected to add 39,000 units in 2021.
The market delivered nearly 36,000 units last year, which marks an improvement over the number of units added to the market in 2019, according to information provided by the real estate consultancy Core.
“We conservatively forecast nearly 39,000 units for 2021, however, further revisions are expected as forecasts will inherently depend on buyer confidence and an uptick in market sentiment as developers continue to adjust to ongoing market conditions,” said research analysts at Core.
In 2021, sales prices and rents are likely to remain under pressure with apartment districts expected to face further issues while established villa districts that saw strong demand in the second half of 2020 and now have limited supply are expected to see price resilience, said the report.
Prathyusha Gurrapu, head of Research and Advisory at Core, said while disrupting the real estate market, the pandemic has also accelerated reforms. Measures to curb supply are gradually showing effect with major stakeholders collectively addressing Dubai’s oversupply.
“Government-led demand drivers including a range of visa reforms, low-interest rates and attractive LTV (loan-to-value) ratios for first-time buyers are supporting and sustaining demand. These steps have also resulted in a slowdown in the off-plan market and relative resilience in the secondary market with record transaction volumes seen, largely led by end-user buyers,” said Ms. Gurrapu.
“This year, secondary sales transactions are expected to be steady as underlying demand is supported by lower capital values and demand drivers such as financial, visa and social reforms. We expect new launch volumes to further reduce in 2021 as developers re-strategize and focus on the absorption of existing inventory,”the report points out.
Ms. Gurrapu said although the impact of COVID-19 has pushed price recovery further ahead, the market has started to witness resilience in sales prices as values reach development costs in many districts. “Villa districts have particularly fared well due to rising demand from occupiers requiring more space and open areas as they adjusted to changes in working arrangements. However, apartment districts maintain their downward trajectory and are yet to show signs of plateauing,” she said.
In 2020, apartment districts continued to see sharp declines, with a few prime districts such as Downtown Dubai and Palm Jumeirah comparatively going against the trend. The more affordable apartment districts such as Discovery Gardens and Dubailand have been the weakest performing areas over 2020.
“Looking historically from the peak values of 2014, villas dropped nearly 31 percent while apartment districts dropped over 35 percent with older districts such as JLT and Discovery Gardens witnessing over a 40 percent drop over the last six years. However, the villa market has displayed relative levels of resilience with lower year-on-year declines due to evolving occupier needs in the wake of COVID-19. The Springs and The Meadows, Arabian Ranches, Palm Jumeirah were the most resilient villa districts with nominal changes in year-on-year sales prices, supported by a strong transaction market performance in the fourth quarter of the year,” noted the report.
Rents in apartment districts, in general, have fallen sharper than villa districts with a higher share of apartment districts witnessing double-digit drops. In 2020, rents of villas dropped nearly 33 percent while apartment districts dropped over 40 percent with many districts displaying reductions over the 45 percent mark over the last six years.