Covid-19 impact on the UAE property sector: When will consumer confidence return?
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Covid-19 impact on the UAE property sector: When will consumer confidence return?

Covid-19 impact on the UAE property sector: When will consumer confidence return?

In a post Covid-19 world, the property sector needs to adapt and re-align to meet customer demands and mitigate the long-term effects of the pandemic

Gulf Business

Even during the best of times, the property market can be a stressful endeavour for even the most seasoned investors. First-time buyers, those looking to lease their property, and for many across the UAE, renting a new apartment can often feel overwhelming.

By the end of 2019, the UAE’s real estate market outlook was looking very positive – the economy was continuing on an upward trajectory, market confidence was on the up and investors had a range of attractive options.

And then Covid-19 arrived.

The global health pandemic has forced the market to try and adapt to a new reality – a reality that has been evolving daily.

Across the UAE, there have been steps taken to both boost the economy and offer citizens and residents new routes into the property market as well as re-energise consumer confidence as part of a long-term plan.

The immediate focus for many had been the Expo2020. Now that the event has been postponed to 2021, many companies, not just in the property market, are looking at their own business models and seeking to course correct. The real estate market has, for the most part, already identified pinch points and tried to mitigate the long term effects of this moment.

Dubai’s long term growth plans were never based solely on the success of Expo2020. The exhibition has always been a part of a broader five-year plan. A short term outlook was never intended to sustain long term success. The current crisis has required some adjustment to the time frame but the investment opportunities in the market are built on firm foundations. The residential population will return to growth and the real effects of the strategic plan will be seen over the coming years.

The industry long recognised the need to adapt to changing consumer and business needs. Dubai has since embraced the smart city philosophy and the real estate industry has incorporated this into its business offering. Agility is key. By integrating prop-tech thinking into how we operate, many firms have been able to remain focused.

Buyers and sellers are using this time to research the market in more depth and use technology to explore further. Stay at home protocols have been mitigated by live online viewing capabilities and virtual tourism has kept interest from international markets afloat and in some sectors, thriving.

Banks have helped stimulate the market through low-interest rates and developers have repackaged their property offers to include longer-term payment plans. Those that have maintained a front foot first philosophy are reaping the rewards.

With this positive economic growth, the real estate sector has responded.

Estimates for 2020 expect the delivery of circa. 50,000 units and critically, the units have a primary focus on the new areas of Dubai such as Dubai South, Dubailand and Mohammed bin Rashid City. The market has adapted and matured, recognising the need to offer the growing population properties that can fit every budget. First-quarter Dubai transactions were up by 10 per cent compared to 2019 and over 22 per cent in Abu Dhabi.

Abu Dhabi has also witnessed a drastic upsurge in its real estate market, resulting in several investment opportunities for international companies and residents.

The capital recently launched the Abu Dhabi Developmental Accelerator’s Program “Ghadan 21”, allowing foreign investors to own freeholds in Abu Dhabi. This follows the recent legislative amendment regarding long-term residence visas as well as residence visas for real estate buyers. Both were identified as key drivers in attracting local and foreign capital as well as increasing competitiveness in the market.

Before the Covid-19 outbreak, the tourism sector was growing at a healthy rate and the broader economic indicators remain valid. Reports indicated that the increasing number of hotel beds had resulted in a surge of guests in Abu Dhabi to 1.2 million (Q2 2019), an increase of 6.8 per cent from the same period a year earlier.

Increasing tourist numbers have also opened significant opportunities in the short-term rental market. Tourists from India, China, and the UK comprise the major percentage of this market. By extension, this has seen the introduction of a set of new players, offering mid to long term rental options for investors. Across the UAE, communities are already seeing the benefits in both commercial and residential sectors and while there may be a temporary lull, the indicators remain positive.

This increase in the tourism sector has opened up a new market for property investors. The emergence of the holiday home sector, led by companies such as Airbnb, has led to owners now able to look at securing significant and critically, guaranteed returns on their investments, transforming the usability of their homes.

Despite a growing population and economy, many residents, almost half, still, however prefer to rent their property rather than own. Yet, based on current interest rates, it is still cheaper to buy than to rent. It’s here where the sector needs to focus.

Developers have made great gains in ensuring that the market has a healthy supply of affordable homes. For many expats, uncertainty about conditions in their home countries may, in fact, lead to greater interest in investing in the UAE market. The UAE has been very proactive in getting ahead of the Covid-19 issue and this should inspire longer-term consumer confidence. As the government has looked to mitigate the spread of the disease and at the same time, shore up businesses affected by the pandemic, the market should be able to navigate these choppy waters.

The supply side of the equation is in place with units available at all price points. Therefore, the goal must be to educate residents of the obvious financial benefits of buying. A mid-income focused developer, recently commented that by catering to a broader segment of the population, supply can readily meet the new demand.

Developing properties that meet customer needs quell any perceived oversupply. From our perspective, we’ve already seen an increase of over 20 per cent in searches for villas. While some residents may face some changes to their previous financial expectations, this readjustment should be able to be serviced by wider choice and more attractive financial considerations from the banking sector.

We also recently saw the announcement of a Dhs1.5bn economic stimulus package in Dubai. The initiatives announced by the government have been set up to directly reduce the cost of living for residents as well as reducing the burden on those setting up and managing their businesses. With the global economy in a state of volatility, the announcement will go a long way in mitigating the short term fluctuations.

Consumers are led by market dynamics and solid leadership. The market requires transparency, dynamism and proactivity. With these elements in place, the capacity for long-term consumer confidence in the market is there. The property sector needs to adapt and we believe that the current climate will be a catalyst. With these factors in place, the UAE’s property market has much to look forward to in the years ahead.

Martin Altmann is the commercial director of HOD.CO, a private sales and marketing company.


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