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All you need to know about UAE’s Q2 residential property market

Real estate property sale and rental prices in the UAE are on the rise, Here's by how much and how

Average villa prices increased by 5.7% qoq, supporting a 9.1% rise year-on-year (yoy) Apartment prices in Dubai saw a modest increase, with average values rising by 0.8% qoq Dubai’s residential market stock is currently at 618,000 units

Dubai’s property market was buoyed by international interest as residential transactions reached a 7-year high in Q2 2021.

According to the latest research by real estate services firm Chestertons titled ‘Observer: UAE Q2 2021 Market Report,’ it showed that total residential transaction value in Dubai increased by almost 50% quarter-on-quarter (qoq) to 31 billion dirhams ($8.44 bn), up from 20.77 bn ($5.66 bn) the previous quarter.

Residential transaction volume totaled 14,426 units, a rise of 35.48% from Q1 2021.  Completed property sales accounted for 71% of total transaction value and 59% of volume in Q2 2021, with off-plan sales yet to approach their pre-pandemic share.

Chris Hobden, Head of Strategic Consultancy, Chestertons MENA, said: “Increased international interest has been a key factor with buyers drawn by visa reforms, the emirate’s quality of life, and comparatively attractive pricing.”

“We have seen a clear improvement in market sentiment among UAE residents this year, with a desire to buy ahead of anticipated price rises, coupled with favorable mortgage rates and generous developer incentives, spurring sales.”

In Dubai’s villa sales sector, strong end-user demand and continued international buyer interest underpinned prices in Q2 2021. As a result, average villa prices increased by 5.7% qoq, supporting a 9.1% rise year-on-year (yoy).

The Meadows/The Springs saw the highest quarterly increases at 6.6% with average prices reaching 885 dirhams per sqft, up from 830 dirhams per sqft in Q1 2021. The Lakes followed closely behind with a 6.5% increase to 1,065 dirhams per sqft from 1,000 dirhams the previous quarter.  Jumeirah Park saw prices rise by 5.4%, while Palm Jumeirah and Arabian Ranches saw 4.9% increases qoq.

On an annual basis, Palm Jumeirah was the only location to see a double-digit rise, with average prices increasing by 12.4% yoy. The Lakes and The Meadows/The Springs also saw notable gains at 8.7% and 8.6%, respectively. 

Meanwhile, apartment prices in Dubai saw a modest increase, with average values rising by 0.8% qoq, although performance varied by location and prices remained 3.7% below their Q2 2020 level.

The Views recorded the highest quarterly price rise, at 5.3%, with prices averaging 1,085 dirhams per sqft, up from 1,030 dirhams the previous quarter. Downtown Dubai prices also increased by 4.5% qoq. Both Jumeirah Lake Towers (JLT) and The Greens saw quarterly price rises of 3%, reaching 765 dirhams and 860 dirhams per sqft, respectively.

Dubai Marina, Motor City, Business Bay, and International City achieved more moderate quarterly price hikes of 2.2%, 1.8%, 1.5%, and 0.7%, respectively.

All other locations recorded quarterly declines of between 1.0% to 5.1%. Dubailand saw the sharpest quarterly fall, at 5.1% to 590 dirhams per sqft, followed by Discovery Gardens, at 2.6%, to 483 dirhams per sqft.

Annually, Downtown Dubai, The Views, The Greens, and Business Bay saw prices rise by 4.4%, 3.3%, 2.9%, and 0.3%, respectively with all other locations experiencing price declines of 0.2% to 12.4 yoy.

In Dubai’s villa rental market, average rents rose by 2.6% qoq, a modest increase in the 2.3% growth witnessed in Q1. Annually, villa rents surpassed their Q2 2020 average, rising by 3.5% yoy.

Palm Jumeirah saw the highest increase in villa rents, at 3.9% qoq, followed by Jumeirah Golf Estates, Victory Heights and The Lakes, which recorded increases of 3.4%, 3.1%, and 3%, respectively. All other locations saw quarterly increases between 1.6% to 2.3%.

Meanwhile, average apartment rents in Dubai recorded modest declines over Q2, with a continued tenant preference for villas, coupled with long-standing oversupply, placing downward pressure across secondary locations.  Apartment rents fell by 0.5% on average and remained 8.7% below their Q2 2020 level.

However, Downtown Dubai recorded a slight increase in average rents, at 1.7% qoq, followed by Dubai Marina at 1.5% and JLT at 1.1%. DIFC saw the highest quarterly decline, at 3.4%, followed by Discovery Gardens at 2.8%. Both Dubai Silicon Oasis and Dubailand recorded 2.5% declines qoq.

“While we expect apartment rents to face continued pressure medium-term, improvements in employment levels noted over Q2, along with continued take-up of the UAE’s remote-working visa, should serve to support demand,” Hobden concluded.   

Dubai’s rental growth

Dubai is among the top 3 cities to record the highest levels of rental growth in 2021.

Savills, a leading global real estate advisor, released its latest report evaluating the rental values and yields reported for Prime Residential properties across the globe. Among the 30 cities in the Savills World Cities Index, Miami, Moscow, and Dubai recorded the highest levels of rental growth over the first half of 2021. 

Each of these markets offers larger units, even in city center areas, compared to locations like Hong Kong or New York.

However, the overall results from the report indicate an average increase of just 0.5% across the cities and a 1.8% drop over 2020 due to global restrictions on travel thereby reducing global demand.

Due to the vast array of development causing a significant oversupply in the market, Dubai rental prices have been on a steady decline over the last 6 years. 2020 witnessed the worst decline with a 12% drop in rents over the city due to travel restrictions and resulting economic decline caused by the pandemic.

Based on the findings from the World Cities Prime Index Report by Savills, the Dubai market appears to finally be reaching a turning point. Prime rental prices increased by 5% in the first six months of 2021, driven by a 20% increase in rents across certain villa communities.

Read the comprehensive report here.  

Macro view of UAE’s residential market

Dubai’s residential market stock is currently at 618,000 units with the addition of 10,000 units in Q2. For the remainder of 2021, an additional 36,000 units are expected to be added.

In Abu Dhabi, 815 residential units were delivered during Q2, bringing the total stock to roughly 267,000 units. By end of 2021, approximately 6,360 units are scheduled to enter the market.

In terms of performance, Dubai’s citywide sale and rental rates continued to register declines of 2% and 8% respectively over the year.

In Abu Dhabi, sale prices have marginally improved by 1% with successful launches of villa projects, whilst rentals remain under pressure, declining by -1.5% compared to the same period last year.

As noted at the start of the year, the residential market continues to see increased demand for good quality villa stock, leading to a 10% increase in prices for Dubai and 6% for Abu Dhabi when compared to the same period last year.