Complex Made Simple

What does 2019 have in store for Dubai’s residential market?

Well, if you're a buyer or an investor, you'll want to read this! Not only do you have options, but also incentives and legislation to make it worthwhile.

2019 projected to support buyers Interest peaking in better quality homes Families preferred ready-to-move-in villas in 2018

There's good news for 2019 – for those looking to buy and invest in residential properties in Dubai. The increasing number of home options coupled with growing affordability in the residential property market have attracted end-users and investors alike.

Residential property prices have been experiencing a continuous quarter-on-quarter fall since early 2017 due to tepid market conditions and a supply glut.

"All market indicators suggest house prices will continue to contract during 2019, however, there is a slowing of the pace of this contraction," said Nick Grassick, Managing Director of PH Real Estate.

"At present, there is sufficient buyer demand to ensure a number of homes are being sold, without fueling an increase in the value of those homes. Should the minimum buying requirements chance – the required amount of benefit be lowered – we will see an increase in the volumes of buyers entering the market, which in turn will have an impact on the availability of property and subsequently the values attached to those homes," Nick Grassick added.

In addition to investment incentives, buyers and investors are also expected to be attracted by positive legislation such as the 10-year residency visa, retiree visa options, freezing of school fees, and foreign business ownership. Furthermore, the upcoming Expo 2020 is projected to attract investment and boost the residential property market.

REIDIN Dubai Residential Property Sales Price Indices – December 2018

Source: Reidin Dubai Residential Property Sales Price Indices 2018



Significant dip in 2018 prime property sales

Overall sales volumes in the residential property market dropped 10 percent in 2018, compared to the previous year, according to the latest Luxhabitat analysis. Dubai's prime property market sales dropped to AED 39 billion ($10.6 billion) in 2018, an 11 percent fall compared to the previous year. The sales dip comes despite Dubai witnessing the fifth-highest decline in prime property prices among 43 major cities, Knight Frank's Prime Global Cities Index Q3 2018 reported.

What is prime residential property?
These are high-end properties in the Dubai's residential market. Luxhabitat categorizes these key areas as prime residential property: Al Barari, Arabian Ranches 1 and 2, Downtown Dubai, Mohammed bin Rashid City, Dubai Marina, Emirates Hills, Jumeirah, JBR, Jumeirah Golf Estates, Jumeirah Islands, Bluewaters, Culture Village, Business Bay, Palm Jumeirah, The Lakes, Springs and Meadows, and Victory Heights.

The lack of market equilibrium is evident in the fact that even the top performing prime property areas such as Business Bay, MBR City and Downtown Dubai are not immune to the market malaise. Downtown Dubai recorded a 12 percent dip in apartment prices, while Jumeirah Park witnessed an 18 percent drop in value in the last 12 months, according to real estate consultancy Core.

"In challenging markets all brokers, regardless of nationality, are required to improve their value proposition to clients – understandably, buyers and sellers expect more for the fees they pay," Nick Grassick said.

Top 3 performing prime residential areas

Source: Luxhabitat based on data by Property Monitor



Positive buying trends

The demand for ready-to-occupy villas doubled in 2018 compared to the previous year, lifted by families looking to move into villa communities, according to the Luxhabitat analysis. Arabian Ranches 2 recorded a 47 percent year-on-year increase in sales in 2018. Completed properties showed a 22 percent quarter-on-quarter increase in transaction volumes and a 7 percent increase through 2018, real estate firm Chestertons reported.

The Luxhabitat analysis based on Property Monitor data also indicated a growing interest for better quality units, with an increase in the average price-per-square-foot for high-end villas.

"The advantages of the Dubai real estate market include freehold ownership, high rental yields, affordability and tax-free investments, these will play a key role in driving international investment into the UAE in 2019. We have seen increased interest from international markets like China and Russia. DLD has also implemented various initiatives to showcase Dubai’s real estate market on the global stage with road-shows taking place in Shanghai, Moscow and Mumbai. The Chinese in particular will have a big impact on real estate sales in 2019," said Fadi Nwilati, CEO, Kaizen Asset Management Services.

Meanwhile, off-plan investments in apartments remained steady. An interesting turn in buying trends was noticed in 2018 with the average size of transacted off-plan units reducing 6.2 percent from an average built up area of 1,100 square feet to 917 square feet.

"Opening the off-plan market in Jumeirah was a much need bolster for the real estate market as it emerged as the top performing area in 2018," the Luxhabitat analysis stated.