2020 is over but not without revealing nuggets of information on why the UAE property sector stumbled in H1 but thrived in H2.
Looking at 2021, there are avenues for more growth, albeit helped with tech, for both real estate buyers and sellers.
Analysis & recommendations
In 2020, despite the major challenges faced by the real estate sector, there was a total of 35,434 property transactions in Dubai, worth up to AED 72.49 billion, according to the Government of Dubai’s Land Department.
Allsopp & Allsopp Real Estate said that developers who focused on adapting to the significant challenges made sure health and safety were prioritized at all stages of the development process and recognized the rapidly evolving demands of the local property market have emerged in a position of strength for 2021.
The company’s own total revenue increased by 22% since 2019 and 2020 became the 11th consecutive year that the company has reported a growth in revenue generated annually.
Lewis Allsopp, CEO of Allsopp & Allsopp said his company’s buyer registration increased by 28% compared to 2019, despite the total number of properties registered decreasing by 3% and as a result, the company’s average sale price rose by 8%.
Allsopp explains “Some sellers are now under the impression that if they wait to sell, they could achieve a higher sale price in the near future. No one can predict the future, but what we have seen post lockdown is a slight incline in average sold price which is due to the high demand for certain properties within certain communities.”
Buying has never been more affordable with the increase in Loan to Value (LTV) brought in by the UAE government as part of the stimulus package teamed with the low-interest rates given by the UAE Central Bank.
These changes brought in by the UAE government have meant that first-time buyers could enter the market and as a result, we have seen mortgage transactions rise by 38%.”
He continues “The LTV increase and low-interest rates may not be around forever. In my opinion, 2021 will be a very interesting year for the property market, which, in Dubai, is continuing to evolve and mature.”
“2020 showed us that the real estate market needed to improve technology and quickly! We have seen virtual viewings continue with clients who are overseas or who are looking to narrow down their search before a physical viewing to save time on their physical search.”
The Dubai population has risen this year by only 2% compared to an increase of 5% in 2019.
The population rising by only 2% this year is as a result of the restrictions on travel, “so growth itself is a huge positive,” Allsopp says.
“But to have sales transactions up by 21% with such a minimal rise in population suggests that many buyers in the market are end-users and chain buyers either upsizing or downsizing their properties – making Dubai their permanent residence.”
New tech for property valuations
houza.com, a UAE site, has become the first portal to give sellers direct contact with local community experts to value their homes.
Launched in September with strong backing from leading real estate agencies, houza’s aim is to make property search and selling as simple as possible for the user.
In order to facilitate the process of selling, houza now enables homeowners to get a market valuation within three easy steps:
1- Find an expert;
2- Arrange a home visit; and
3- Receive the valuation.
Sellers will be presented with the top agencies in their area of interest and request a valuation from one or multiple agents within a couple of clicks.
The valuation booking tool also benefits agencies signed up to the houza with more seller leads, who may be looking to buy as well.
Lewis Allsopp endorsed houza, whose service the company uses, saying: “If a homeowner is currently thinking about selling or letting their property, then this is a fantastic place to start. To give some insight, Allsopp & Allsopp saw a 34% decrease in valuations in October 2020 when compared to 2019, but an increase in client inquiries of 61% over the same time period.”
“houza’s property valuation tool gives sellers and landlords across Dubai a real insight into the real estate agencies who specialize in their community and who would give the most up to date and accurate market appraisal.”
Snapshot of Q4 performance
The adoption of sustainability and technology are two critical themes fast-tracked by the Covid-19 pandemic and likely to shape the recovery of the real estate market in 2021, said property consultant JLL in its latest report.
“While uncertainty will persist in the new year and the recovery will vary across sectors and industries, accelerating digital capabilities and focusing on sustainable performance can redefine business success,” says Dana Salbak, head of research MENA at JLL.
The UAE Real Estate Market: A Year in Review 2020 highlights that while the nation’s real estate market saw a slowdown in performance at the beginning of the year, the second half saw a revival of activity.
Dubai’s sale prices and rental rates continued to register declines by 8% and 12% respectively in Q4 2020, versus the same period in 2019.
Abu Dhabi’s sale prices and rental rates declined by 4% and 3% over the same period.
The second half of 2020 saw a revival of activity as lockdown measures eased and pent-up demand filtered through the residential market in both Abu Dhabi and Dubai.
Future demand is expected to focus on projects delivering true customer service through amenities, health and safety, and blended uses.
The future of office spaces is expected to be a ‘hybrid’, combining both remote working and in-office practices.
Office markets in both Dubai and Abu Dhabi remain tenant-friendly as landlords continue to offer incentives and attractive lease terms.
In the short-term, JLL expects a significant drop in demand for all office spaces including flexible ones.