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Property investing and home buying interest in UAE rising

It’s a mixed bag of results for Q3 2020 in the United Arab Emirates’ property market

Average apartment prices fell by 3.4% from Q2 2020, and 11.4% year-on-year Real estate brokerage reported a 40% increase in mortgage transactions in Q3 2020 compared to Q3 2019 Aldar Properties became the biggest listed developer in the UAE

It’s a mixed bag of results for Q3 2020 in the United Arab Emirates’ property market.

Sales up, prices down

Despite a clear quarterly rise in property sales during Q3, Dubai’s real estate market is expected to face further challenges in both the rental and sales market, according to the latest Observer: Dubai Residential Report Q3 2020 from Chestertons.

Increased sales activity in Q3 rose by 50% Quarter-on-Quarter (Q-on-Q) due to pent up demand from Q2, along with developer promotions offered to clear built, but unsold, inventory. The total transaction volume was down 21.7% from Q3 2019. 

Chris Hobden, Head of Strategic Consultancy, Chestertons MENA, warned: “The ongoing economic impact of COVID-19, and a likely reduction in the emirate’s population, both key drivers of Dubai residential prices, are set to hamper market performance.”  

In the sales market, average apartment prices fell by 3.4% from Q2 2020, and 11.4% year-on-year (yoy). The largest price declines were witnessed in Dubai Sports City, with average prices falling by 5.5% Q-on-Q to 621 Dirhams per sqft ($170). Dubai Silicon Oasis was the only other location to see a quarterly fall in average prices above 5%, reaching 540 Dirhams per sqft, representing a 5.3% drop. 

On an annual basis, villa sales prices fell by 5.8%.  

Palm Jumeriah was the only location to witness a price increase, up by 2.2% from 1,820 Dirhams per sqft to1,860 Dirhams per sqft. 

The Meadows/The Springs saw the highest quarterly decline at 2.5%, with average prices reaching 795 Dirhams per sqft from 815 Dirhams per sqft in Q2. 

In Dubai’s rental market, apartment rates declined by 3.6% in Q3, with all areas once again showing falls in average rental rates. International City and Discovery Gardens witnessed the sharpest quarterly rental declines of 5.8% and 5.5%, respectively. 

Villa rents proved more resilient, falling by just 1.2% and 5.6% on a quarterly and annual basis.  

In terms of transactions, completed property sales totaled 4,587 units in Q3, compared to 1,902 over the second quarter.  Off-plan sales totaled 3,262 units over Q3 a decrease from the 5,943 units sold over Q3 2019.  

Read: Low real estate values in Dubai boost sales but are property stocks the real opportunity here?

Sobha Realty witnesses surge in investor interest  

Sobha Realty a premium real estate developer announced a successful Q3 witnessing growing interest from new investors.

Jyotsna Hegde, President of Sobha Realty, said: “As global borders continue to reopen cautiously, we have noticed keen interest from our primary markets, including Saudi Arabia, India, China, and the wider GCC region. Furthermore, we have also registered new investors from emerging markets, specifically Canada and Nigeria that accounted for nearly 20% of all international buyers.”

The master development is set for completion in 2025 and key projects within the community include Greens, Creek Vistas, Creek Vistas Reservé, Gardenia Villas, Garden Houses, One Park Avenue, and Forest Villas. Around 30% of the total land area is set to encompass a dedicated green cover and open spaces.

Delays in property pre-approvals 

Allsopp & Allsopp report that an increased amount of mortgage applications is causing the pre-approval process to take up to ten days longer than usual, and in some cases, leading to buyers missing out on properties.  

The real estate brokerage reported a 40% increase in mortgage transactions in Q3 2020 compared to Q3 2019. 

Stuart Roe, Head of Mortgages at Allsopp & Allsopp said: “While bank employees adapt to remote working, an increasing amount of mortgage applications are being made impacting the length of the process of getting a pre-approval and in some cases, the final mortgage approval.”

A number of UAE banks are airing caution when it comes to issuing mortgages as a result of uncertainty clouding the employment of certain applicants because of the turbulent economic climate surrounding certain industries such as aviation, hospitality, and construction.  

The increase in Loan to Value (LTV) introduced by the UAE Government as part of the stimulus package, has encouraged many more buyers into the market who head straight to the bank to find out if they are eligible for the 80% mortgage. 

A delay in mortgage pre-approvals, in some instances, means buyers are missing out on properties.

Read: New UAE Real estate consortium to boost property sector. Have prices hit bottom?

Aldar becomes top developer
Aldar Properties became the biggest listed developer in the UAE after taking over the development and management of projects worth 30 billion Dirhams ($8.2 billion) as part of an agreement with ADQ, a holding company with a broad portfolio of major enterprises in Abu Dhabi. 

Aldar shares climbed as much as 15% to close at 2.54 Dirhams, the highest level since early 2017. The rally lifted the company’s market value to about 20 bn Dirhams, taking it past Emaar Properties.

As part of its efforts to diversify, Aldar has been investing in a fee-based, development management division to manage buildings for clients. The government is the company’s biggest and Aldar has a deal to build more than 25,000 homes for Emirati citizens along with related infrastructure.