UAE Property Market Looks Promising as Sales for Villas Increase

UAE property market is bouncing back from the impact of Covid-19. The industry looks affirmative after experiencing a lengthy phase of decline in the prices. Villas in locations such as Palm Jumeirah, Business Bay, The Lakes, and Jumeirah Islands experienced a modest rise in prices in January 2021.

According to ValuStrat, the valuation index for 2021 is almost 14% lower compared to the previous year. Dubai’s VPI — Residential Capital Values for Dubai index stood at a stable 65.3 points, compared to 79.1 the previous year. This suggests instability in the capital value of houses in Dubai. They also indicated a downward trend in villa sales and a slight decline in the upcoming matured villa projects

Exponential Rise in the Demand of Ready to Move-in Villas:

In an interview given to Arabian Business Global, President of Property Finder,

Ari Kesisoglu, stated, “Demand for ready to move in villas and townhouses in Dubai has witnessed a growth of over 500 % since May 2020 as residents choose to upgrade their living situations.”

The top reason for the rise in sales of secondary villas and townhouses is the opening up of the property market for investment to Non-GCC nationals.

Substantial Rise in Cash-based Transactions:

There has been a surge in the trend of purchasing villas through cash-based transactions. According to Construction Week, in November last year, cash-based transactions accounted for 59%, with a 14.4%,  monthly gain in transactions of cash-based sales, with ready-made housing transactions surged by 22.3%.

Buyers are Preferring Ready-made Houses over the Unplanned:

There has been an exponential rise in buyers purchasing ready-made properties over unplanned houses. The data from ValuStrat indicates the transaction volume for ready-made houses increased 18.1% whereas transaction volume for unplanned houses fell drastically by 51.5%.  There has been a surge in Off-plan sales at a lower monthly rate of 9.4%.

Key Highlights of November 2020:

Here are the key highlights of November 2020 –

Emaar, Nakheel, and Damac remained the top three property developers

The most preferred locations to buy or rent homes were Dubai Marina, Jumeirah Village, Business Bay, Palm Jumeirah, and Town Square

Despite the higher overall cost, villas witnessed an increase in sales compared to apartments as they have lower prices per sq. ft.

Apartments located in prime areas such as – Jumeirah Beach Residence, Dubai Sports City, witnessed a drop of 0.9% per month in their capital value

Unplanned locations with most of the transactions were Jumeirah Village, Tilal Al Ghaf, Business Bay, and Downtown Dubai

The price & demand elasticity of villas is much higher compared to apartments

Abu Dhabi Witness a Steep Decline in Rental Rates of Villas:

The UAE’s Capital also witnesses a steep reduction in the prices of villas as well as apartments due to poor market conditions and job loss caused by the coronavirus. Several properties have gone vacant as tenants left for their home country. In the UAE, residency permits are tied up to employment, and the expatriates are supposed to leave the country on an urgent basis as soon as they lose the job. 

With a substantial number of expats leaving Abu Dhabi after being laid off by their employers, the average rent for villas fell 3% in 2020, compared with a 5% drop on average for apartments as per Real estate consultancy firm ValuStrat.

Prices for Villas Rose First Time since 2015:

According to Bloomberg, the prices of the Villas based in Abu Dhabi were witnessing a downward trend from the last 5 years. However, banking on high demand for properties in the Covid era, the value of villas in the UAEs capital rose by 2%. Due to higher GDP and per capita income, villas in Abu Dhabi account for almost one-third of the total housing supply. The prices for apartments declined by 4%.

The decline in the Rental Value of the Property: 

ValuStrat data reveals that the average residential value in Abu Dhabi fell drastically by 9.5% YoY to AED772 per sq. ft. in Q4 FY20. However, the data also predicts stabilization in rents and capital values at established villa and apartment locations due to balanced new supply in the near future.

Growth Drivers:

The prominent growth drivers which favor the surge in the sales of apartments & villas in 2021 are as follows:

Positive Market Sentiments Due to Rollout of Sinopharm:

The experts predict market sentiments are expected to be positive due to the rollout of Covid vaccine – Sinopharm.

Increase in Non-Oil GDP:

The rating agency, Fitch Ratings predicts a 2.2% increase in Abu Dhabi’s non-oil GDP.

Govt. Initiatives:

The initiatives launched by the UAE government such as Golden Visa, FDI Laws, Cohabitation laws, Expo 2020, etc. will encourage millions of foreign professionals to settle in the UAE. This will spur the demand of Villas and will have a favorable impact on the economy as well as the real-estate sector.