Year in review – 2021: Dubai’s real estate on the crest of a wave

What a year 2021 was for Dubai real estate, breaking all sorts of records in sales volumes, values and mortgages. To highlight the year’s achievements, we broke a 12-year record in terms of the value of real estate sales transactions, with properties worth Dhs151.07bn sold. There were a total of 61,241 real estate sales transactions that took place, the highest since 2013. When compared to the previous year, 2021 had a 110.19 per cent increase in sales value and 74.77 per cent increase in sales volume.

The secondary market transacted 36,480 properties worth a total of Dhs105.5bn, the highest since 2008. When compared to 2020, last year showed an increase of 74.77 per cent in sales transactions volume and an increase of 110.19 per cent in value. To put it in perspective, when we compare these figures to pre-Covid times, such as 2019, last year showed an increase of 55.47 per cent in volume and an increase of 90.10
per cent in value.

When it comes to mortgages, 2021 was an all-time record-breaking year, with a total number of 19,520 mortgage transactions, exceeding the previous high recorded back in 2017 by 26 per cent. The total value of mortgage transactions reached Dhs127.8bn.

In addition, off-plan sales rebounded in 2021 coming back to a 50/50 split of total market sales transactions. When we look at the volume of sales transactions, the off-plan market transacted 24,761 properties, worth a total of Dhs45.5bn.

During the pandemic, many developers took a step back and really assessed the market to understand what type of projects they could build that checked all the boxes for investors and consumers alike. This is one of the factors contributing to the resurgence of demand in the off-plan market coupled with the fact that current supply is low in prime, popular areas and prices have increased in the secondary market.

We had a great start to the year, with January being the all-time best on record with 5,797 real estate sales transactions worth Dhs16.69bn. This also includes the off-plan segment, as off-plan volume increased by 183.05 per cent and value increased by 307.88 per cent compared to January 2021. In January, 53 per cent of sales transactions were in the secondary/ready market and 47 per cent were off-plan.

Lewis Allsopp, group CEO of Allsopp & Allsopp, says, “We are now two months into 2022 and I have been cautiously optimistic when it comes to Dubai’s property market performance this year. I have remained careful due to the huge climb in prices we witnessed last year. However, sales in the first month of 2022 were extremely strong, resulting in January being our best month in business, ever.

“Big ticket sales are being traded to high-net-worth individuals (HNIs) and we are seeing a huge demand in the luxury segment of the market. In some cases, we were getting calls from clients who wanted to be fetched for viewings from hotels while on holiday or a business trip, with many of them purchasing properties. For luxury property sales to become the growing trend after such a turbulent time has been extraordinary.”

Allsopp added, “As we move further into 2022, I feel that we will start to see the market level out a little and I believe we will see some stability in Dubai’s real estate market. I often speak about the maturing Dubai property market and what I mean by this is a property market that is sustainable and reliable. Demand for properties is still there and is still high; however, both buyers and tenants are in favour of staying put with their current properties, as they are beginning to be outpriced.”

In 2021, the shift to villa/townhouse communities, especially in the suburban areas of Dubai, continued from 2020. Demand was high, causing supply to dwindle and prices to increase by over 20 per cent in some communities, and it looks like the trend will continue into 2022.

Sam McCone, managing director of McCone Properties comments, “The most significant surge in demand has been in the villa and townhouse communities near the city, including Dubai Hills, The Springs and Meadows. As we saw across the globe, the pandemic caused many people to reconsider where they lived. All of a sudden, tenants and homeowners alike wanted to trade in their apartments and move to townhouses and villas, as they enjoyed the extra room and outdoor lifestyle that comes with such communities. Dubai Hills, in particular, has done well as it is the one community that offers relatively new townhouse and villa options just 10 to 15 minutes from Downtown and Dubai Marina.

“In 2022, I believe we will see the more established and well-situated apartment communities, such as Downtown and Dubai Marina, increase in demand as the effects of the pandemic subside, and we all start to realise all the benefits that come from the central areas of Dubai.”

Allsopp adds, “We have seen a continuation of price increases in the first few weeks of 2022, in both villa and apartment communities. This is a great start to the year for sellers, and further demonstrates the demand in the market. However, I do anticipate this stabilising as we move through the year. Buyer and tenant price appetite is beginning to level off. This will stabilise property prices in both sales and lettings.

“There will be new property launches this year and we will see the handover of a number of luxury developments such as the Royal Atlantis, One Palm and villa community, Tilal Al Ghaf. As we see with many development handovers, there will be a shift in pricing of comparable communities to level up with the new supply, which will bring some price stability in the market.”

It will be interesting to see how the market adjusts to the lack of certain high demand stock such as villa/townhouses and luxury properties.

Allsopp says, “We reported a trend of undersupply in the villa market for 2021. This trend has continued into the first quarter of 2022 and this is where we need to accept that we can no longer talk about the Dubai property market as a whole. We can note overall trends, but certain segments of the market will buck the trends.

“For example, we can say that overall there’s been a pull back from buyers and tenants as prices increase, but in certain communities it is evident that buyers are willing to pay, or in some cases, go above asking prices. We often see a number of clients trying to secure these units and it is now common to see buyers competing to out-bid each other.”

He adds: “With such an undersupply, it is rare that a property is available for longer than a week, with most available units now selling the same day they are listed, or even before they go live across property portals. The post Covid-19 lockdown effect is still being felt within the Dubai property market. The lockdown forced families to re-evaluate priorities, with many coming to realise they wanted a property with more space. This factor, coupled with the increase of international investment, a rise in HNIs moving to Dubai and a growth in new businesses or businesses shifting to Dubai, has been a catalyst for the surge in interest for villa communities, in both lettings and sales, that has yet to slow down.”

McCone adds, “There is definitely a lack of townhouses and villas at the moment. It is tough to find reasonably priced options in the communities I mentioned before in the rental market. The sale market does have more options available, but in many cases, the owner’s expectation of what they should be selling for is about 10 per cent over the actual prices. As a result, all the major developers (Emaar, Damac, Nakheel and Majid Al Futtaim) are introducing new villa communities into the market, with many selling out in days.”

It appears that this year will continue on an upward trajectory when it comes to sales volumes and price increase in prime, popular areas. With new supply being low in prime areas and in certain asset classes, such as villa/townhouses, we can continue to expect price increases in these areas, as demand continues to be strong. The off-plan segment will most likely not cool down anytime soon due to investor sentiment, attractive pricing, the lure of Dubai and overall good projects launching in the market.

Allsopp concludes, “Dubai is an incredibly attractive city to live, work and invest in at the moment based on a host of reasons, including the way the government has steered us through the Covid pandemic and the future vision it is working towards. For this reason, going into 2022, I think we will see more of the same in terms of demand: areas with villas will continue to be highly sought after complemented by a continuing resurgence in areas with apartments, particularly with the anticipated population increase in the emirate.”

Taken from Property Finder’s Prestige special report in Gulf Business’ March issue