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A Quick Analysis of the Real estate sector’s performance in Q1, 2022

Dubai’s real estate sector is alluring the attention of global investors and surpassing its previous milestone every year. This is very evident from the substantial rise in property prices and primarily rental value. Expo 2020, Masterplan 2040, and the successful handling of Covid-19 have resulted in an influx of expats investing in Dubai’s real estate or starting a business in the city which led to an increase in the rental value of both residential and commercial property. 

Successful handling of Covid-19 has attracted the world to Dubai which is very evident from the latest report by the Dubai Statistics Centre which confirms that Dubai’s population crossed the 3.5 million mark as of April 2022.

Substantial Increase in Rents for Apartments & Villas 

According to a report by CBRE titledDubai Residential Market Snapshot April 2022’, the average rent for the property in Dubai has increased by 13.1% in the last 12 months. The average rent for apartments as of April 2022 surged 11.7% compared to the previous year. Villas surpassed apartments in terms of rent increase and witnessed a rise of 22.5% compared to 2021. The average annual rent for an apartment is AED 80,000 and the rents for Villas stood at AED 238,441.

In Downtown Dubai and Palm Jumeirah, in the year to March 2022, the average rent for an apartment increased by 29.4% and 39.6% respectively. Over this period, average villa rents in Emirates Hills, Jumeirah Islands, and Palm Jumeirah increased by 9.3%, 31.3%, and 36.7% respectively. In the year to date to March 2022, new supply delivered in Dubai totaled 7,812 units, with an additional 56,871 units scheduled to be delivered in the remaining three quarters of the year

According to the CBRE Report, Palm Jumeirah and Al Barari were at the pinnacle in terms of an increase in the rents. The average asking rent at Palm Jumeirah was AED 197,482 and AED 801,940 at Al Barari.

Which Areas Witnessed Increase in Rents? 

Apartments

According to the CBRE Q1, 2022 report, the areas where the rents for the apartments increased at the fastest pace in the first quarter of 2022 include Business Bay (4.9%), International City (4.2%), Dubai Marina (4.1%), Damac Hills (4.1%), Palm Jumeirah (3.9%), The Old Town (4%), Jumeirah Beach Residence (3.5%), Downtown Dubai (3.3%), Sports City (3.2%), and Jumeirah (3.1%). 

The areas where the rents for the apartments witnessed a steep decline include Liwan (-0.9%), Bur Dubai (-0.6%), and Arjan (-0.4%).

Villas

In terms of Villas, the areas where rents increased the most in Q1, 2022 include Jumeirah (4.8%), Sustainable City (4.8%), Emirates Hills (4.7%), Arabian Ranches (4.5%), and Damac Hills (4.5%). 

The areas where rents for the villas witnessed a decline include – Deira (-1.9%), Jumeirah Park (-1.6%), Reem (-1.2%), and Al Furjan (-0.4%).

Upswing in the Property Prices

The CBRE Q1, 2022 report reveals that the average prices for the property increased by 11.3% in the year to March 2022. Over this period, the average prices for the apartment increased by 10% and 20.2% for villas. As of March 2022, the average prices for an apartment were AED 1,118 per square foot and the average price for a villa was AED 1,267 per square foot. 2014 was one of the best years for the real estate sector. Compared to 2014, these rates per square foot are 26.2% and 12.3% below the peak, for both apartments and villas respectively.

In the apartment segment, Downtown Dubai witnessed the highest average sales rate per square foot of AED 2,021 while Palm Jumeirah was at the top in terms of villas segment where the highest average sales rate per square foot stood at AED 2,910.

Transaction volumes in Q1 2022

Dubai’s residential market is breaking records everywhere and transaction volumes are not an exception.  According to the CBRE Q1, 2022 report, the total volume of transactions reached 19,009 in the first quarter of 2022 which was the highest figure ever recorded in the first quarter of the year.

Only in the month of March 2022, Dubai’s residential market witnessed a total volume of transactions reaching 7,865 which was an 83.4% increase from the previous year. Over this period, off-plan sales increased by 94.6 % and sales in the secondary market increased by 76.1 %.

Forecast

The rents in mid-market and affordable segments are expected to rise in the coming quarters while rents in luxury or premium real estate will consolidate and they have reached their highest mark since 2020. Expo 2020 has played a decisive role in fostering the demand for luxury real estate however as the grand event is over now most of the Expo-related demand has ended. 

Dubai witnessed a colossal increase in the number of expats moving to the city due to strict Covid-19 related restrictions in their home countries. However, as the pandemic situation is normalizing, Dubai is likely to witness a large number of affluent expat buyers moving out of the city to their home nations which can adversely impact the demand for luxury real estate. However, overall Dubai real estate will benefit from an increase in the number of new expats taking jobs in Dubai which will boost the demand for affordable residential property. The current and upcoming free zones in Dubai will attract several new entrepreneurs to start new businesses in the city. Dubai issued 72,152 new business licenses in 2021 and in Q1, 2022; the new business licenses already reached 24,662 which is an increase of 58% y-o-y. The upcoming new businesses have created more demand for office space which will boost the demand for commercial real estate. At Business Bay, average rents have increased from AED 76 per square foot to AED 101 in these last 12 months. The rents for Grade-A offices in Dubai have increased 30-40%. The establishment of new businesses will create more demand for accommodation and will further boost the demand for apartments and villas in the coming months. This is indeed ‘a glad tidings’ for Dubai’s residential real estate.