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Dubai’s housing demand gathering momentum in Q3 even as prices rise

Increased rental demand and property sales are strong indicators of robust real estate activity. The Dubai real estate sector has witnessed an upward trend in the rental market in Q3, 2021

Business Registration & Licensing (BRL) recorded a 63% yoy increase during H1, 2021 Total estimated proejct completions to Q3 stood at 16,654 apartments and 3,397 villas The property sector recorded a new milestone in Q3 of 2021, reaching 42.35 billion dirhams ($11.54 bn)

Increased rental demand and property sales are strong indicators of robust real estate activity. The Dubai real estate sector has witnessed an upward trend in the rental market in Q3, 2021, with an estimated 14% increase in affordable housing and up to 30% increase in luxury housing in selected areas.

The fourth quarter is expected to follow suit according to Zoom Property Insights (ZPI), driven by Expo 2020. In the first 10 days of the event, 411,768 visitors attended. The next 6 months will see up to 25 million visitors from different countries visit, rent, and even buy properties around the city and beyond.

ZPI said property sales are also speculated to witness a surge in Q4, as the third quarter showed promising results with 15,926 deals.

VPI index

Pioneers of the ValuStrat Price Index, VPI analyses and reports the change in capital values experienced by a representative fixed basket of freehold residential and office units.

The third quarter of 2021 ValuStrat Price Index for Dubai’s residential capital values saw gains of 5.1% quarterly and 9.8% annually to reach 72.5 points.

The villa submarket, which is a small portion of the overall market, led this recovery trend with 8.9% gains quarter-on-quarter (qoq) and 21.3% year-on-year (yoy).

In contrast, apartments improved in single digits, 2.4% qoq and 2.4% yoy.    

Macro-economic landscape

Dubai’s Department of Economic Development (DED) announced its latest economic outlook predicting recovery of 3.1% for 2021, driven by EXPO 2020.

  • Business Registration & Licensing (BRL) recorded a 63% yoy increase during H1, 2021
  • Dubai Customs reported number of transactions growing 53.4% yoy to 11.2 million during H1 2021
  • The market capitalization of listed securities in Dubai Financial Market (DFM) grew 14% yoy to 388 billion dirhams ($105 bn), but the total trading value dropped 8.4% yoy
  • Dubai International Airport (DXB) handled 10.6 million passengers during H1, 2021, down 41% from the same period last year

Residential supply

Total estimated project completions to Q3 stood at 16,654 apartments and 3,397 villas, equivalent to 49% of preliminary estimates for this year.

  • Approximately 14,775 apartments were under construction with the majority located in Dubailand (32%)
  • Q3 saw no less than 40 luxury home transactions valued at over 30 million dirhams ($8.2 mn) each, an increase of 38% when compared to the previous quarter
  • When compared to the previous quarter, ready home sales were down 11.8% as off-plan sales regained traction and improved 11.9%
  • The citywide average transacted price per square foot has reached 1,026 dirhams ($280), similar to levels witnessed seven years ago.
  • Overall citywide residential asking rents grew 6.9% yoy
  • On a quarterly basis, residential asking rents were up 3.6%, the third consecutive quarterly increase
  • Compared to the same period last year, villas continued their rally upwards jumping 14.1%

First-time buyers

The property sector recorded a new milestone in Q3 of 2021, reaching 42.35 billion dirhams ($11.54 bn). Betterhomes, one of Dubai’s longest-standing real estate brokerages, said in its Q3 2021 Dubai Real Estate Market Report that there are signs the pace of recent price rises is starting to slow as the supply and demand dynamic shifts in reaction to recent price increases.

The mortgage market in Dubai has grown at an exponential rate in the first three quarters of 2021, growing by 68% compared to last year and 71% more than in 2019, according to the latest official data released by mortgage Finder.

Low-interest rates are a major factor attracting new buyers to the local property market as 83% of mortgage transactions were conducted by people who were purchasing property for the first time in the UAE.

In 2020, the UAE Central Bank reduced the down payment requirement for first-time buyers in the UAE by 5%, taking it to 20% for non-UAE nationals and 15% for nationals. Villa/townhouse properties accounted for 63% of mortgage purchases while apartments made up 35%.

The off-plan market saw 6,909 transactions worth 13.5 bn dirhams ($3.68 bn) and the secondary market transacted 9,017 properties worth 28.85 bn dirhams ($7.86 bn).