Abu Dhabi, Dubai property market upbeat on both demand and supply side

What are the key highlights dominating the real estate sector in Abu Dhabi and Dubai; what’s the outlook for H2 2023?

During Q1 2023, the rental rate growth for apartments, villas and offices in Abu Dhabi, Al Ain, and Sharjah showed a more moderate trend in annual growth, while the rental rates in Dubai continued to rise significantly. As such, villa rental rates in Dubai have surpassed the previous market peak from Q2 2014 by an impressive 3 per cent.

When it comes to sales prices, Dubai experienced double-digit growth, while Abu Dhabi saw minimal changes. Interestingly, off-plan sales in both Dubai and Abu Dhabi commanded substantial premiums over completed properties. Although it may be challenging to reconcile this premium, given the immediate rental returns or occupation offered by completed properties, it highlights the strong demand for off-plan purchases.

Furthermore, it’s important to note that sales prices in Abu Dhabi still offer considerable competitive pricing to similar properties in Dubai. This means that Abu Dhabi represents exceptional value for buyers in the market. Overall, these market dynamics showcase the positive trends and opportunities available in the real estate sector.

What are some of the key real estate projects that will be delivered in H2 2023 and how will that impact supply in Abu Dhabi and Dubai?

Abu Dhabi’s development pipeline shows no signs of slowing down throughout the rest of 2023. Despite the fact that several new projects are currently in the planning and design stage and anticipated to launch over the year, the market still lacks a sufficient number of high-quality
villa communities.

Approximately 4,450 residential units are due for completion before the end of 2023. Major projects include Noya Villas on Yas Island, a number of buildings in Al Raha Beach and Luluat Al Raha, two developments in Masdar City, a number of villas in Jubail Island in addition to several buildings in Qaryat Al Hidd in Saadiyat Island.

In Dubai, we expect another 35,000 apartments and 6,800 villas to be handed over in 2023. New stock will be added across all areas of the emirate, with deliveries in established communities, such as Downtown Dubai, Business Bay and Jumeirah Village, as well as in upcoming developments including Mohammed Bin Rashid City, Dubai South and Dubai Creek Harbour.
MBR City will see the bulk of handovers with more than 10,000 residential units.

Do you see rental rates and sales prices rising in H2 as well?

In Abu Dhabi, residential rental rates (apartments and villas) are expected to remain mostly stable with marginal increases for specific developments.
Sales prices are expected to remain generally stable in 2023, however, the lack of ‘good quality’ completed projects/units available for sale in the secondary market will help boost sales prices in specific developments/locations.

Demand for top quality, well-located and competitively priced off-plan projects will remain positive.

In Dubai, we expect rental growth to continue, albeit at a slower pace, until new supply balances out and rental growth slows. It is also worth noting that the Dubai government plans to launch a new rental index in 2023 that will be based on building star ratings, reflecting quality and facilities, rather than location and/or community trends.

Initially, the index will only encompass residential buildings, villas will be considered at a later stage. Under the new index, four-star buildings (classed as ultraluxury) will be categorised as “free”. This means there will be no restrictions in terms of rental increases.

The lower-rated buildings will be allowed to increase rents as per RERA policy only after approval. Sales prices are also expected to follow a similar trend. Overall, villa communities (old and new), in particular, will continue to perform well.

Give us your outlook for the primary and secondary market. Which is likely to do better?

The markets of Dubai and Abu Dhabi have witnessed a notable trend in off-plan sales, with properties fetching significant premiums compared to completed properties. Though it is expected that this trend will persist, it is most likely to be short-lived.

It is important to note that sales prices in Abu Dhabi continue to remain at a steep discount comparable properties in Dubai and represent exceptionally good value. Off-plan prime and high-quality projects located on Saadiyat and Yas Island have achieved rates ranging from Dhs1,500 up to Dhs3,800 per square foot/sellable area.

What trends can we expect to see in the commercial real estate market in Abu Dhabi and Dubai?

Over the last six to 12 months, we have seen a definite uptick in the office segment’s performance in Abu Dhabi and Dubai, a trend that is expected to continue in the short- to medium-term.
Quality or quantity is the key here. Well-managed, single-owned buildings with Grade A specifications in strategic locations will perform better and are likely to see increased occupancy and performance.

Strong inward investment on the back of advanced business reforms and government initiatives resulted in improved business confidence and newcomers to the market, which stimulated demand for office space, particularly for Grade A/B+ specification in prime locations.

Technological advances, remote working, co-working, and virtual offices have made the need for physical office space an option, not a necessity. This will affect office performance, particularly with regard to older stock.

What should potential property investors be considering in such a market?

Doing due diligence is crucial here, as both off-plan and ready-to-move-in properties have advantages and drawbacks. Before making a final decision, consider the time frame for having the property, the availability of funds, your preferred location, the profitability and the developer’s reputation and the quality of other completed projects.

Choose the option that best meets your current needs, but most importantly, make certain that the property you intend to buy was or will be built by a strong property developer.