2020 was a roller coaster for Dubai’s real estate professionals. From the Covid-19 pause that stopped showings and sales entirely the second quarter, to the slow recovery and crashing rental market in apartments-saturated Dubai, to hot markets in villa communities, there were plenty of downs and ups.
From the Downtown apartments and rental recovery to what will happen with inventory, here we gathered some predictions on what the market holds for 2021.
It seems very much likely midrange apartments market to pick up by the second quarter of 2021.
Many developers reduced pricing during COVID, so buyers will now see an opportunity to purchase “value for money”. Lenders seem to plan on holding the current interest rates until 2023, which will also help.
Dubai market will most likely recover 50% of what was lost by the summer of 2021, though most experts say it depends on how many employees return to the office and how many businesses recruit new employees to work onsite.
That’s contingent on 50% of people returning to full time work. If 75% return, the market will recover 75%. If it’s 25%, the market will recover 25%. It’s purely a supply and demand issue.
There’s a direct correlation with the rental market and people retuning to regular working environment and with the current trends, it seems 50% of the working force will be back in summer 2021. Dynamics is what makes Dubai, Dubai.
The majority of local real estate industry insiders surveyed by Cityscape in 2020 think it will take at least 18 to 24 months for things to turn around.
Although the amount of new leases being signed in the fourth quarter is comparable to the amount signed this time last year, non-renewal rate has dramatically increased. This is causing an incredible rise in inventory and pressure for landlords who now dropping prices and increasing concessions to fill the vacancies.
It will take at least two cycles of new employees coming to Dubai, to absorb this inventory. During this time, we will also see the addition of new rental inventory in the pipeline. When most of the inventory does absorb, we will then see prices increase until new inventory can be built.
The hope is that as more and more people start to come back to work available inventory will be absorbed, and if all goes well, then the rental market should be back to near pre-Coronavirus numbers by September when schools will open and there is more consumer certainty and confidence.
Even More Flexibility
Flexibility in lease terms is here to stay. Many apartment owners in urban areas now easily agree to sign agreements with a short-term renters in order to combat a tough lease-up environment.
Lease terms will become more flexible as individuals travel and temporarily relocate given the work from home trends driven by the coronavirus pandemic. There is already an increase in tenants signing leases with duration from two months to nine months to avoid signing a full-year lease.
Right now, sales inventory is rather low because of economic and political uncertainty as well as health concerns. In addition, you have rising prices in some particular areas, so sellers are benefitting from holding off on selling their properties. However, price appreciation will level off. Most likely demand will remain strong because Dubai is a desirable place to live, but supply will increase so price appreciation will slow down. In addition, low interest rates are already baked into the equation.
Second Home Syndrome
After busy markets in popular waterfront communities in 2020, there will be even more holiday home purchases.
People are vacationing differently now than ever before, and many are putting a bigger focus on privacy and cleanliness while still having the benefits of exclusivity and luxury. Holiday homes provide the confidence that travelers will always return to a clean and safe space. What’s more, holiday homes in a managed community offer real potential for rental income that can offset ownership expenses.
Along with the rise of the holiday home, there will be a rise of the “co-primary residence,” or an apartment near the office in the city.
As executives who decamped to luxury suburban villa communities on the outskirts of Dubai ease into month nine of work from home, their mindset has changed indefinitely. They will never abandon the unrivaled energy of Downtown Dubai, but it’s a place where they will spend three days a week before they retreat to their spacious comfortable homes in communities, like Jumeirah Golf Estate and Palm Jumeirah. Many will look to find small city homes closer to the office, which will help the struggling central city residential market.
Such lifestyle aligns with the emerging trends in the future of work as a much more fluid and flexible where work and life blend.
Increased Foreign Interest
While foreign investment has been slow this year, some in the industry believe it’s coming back along with the continued opening of new developments. Demand for apartments won’t vanish long term.
“I am primarily working with international buyers,” says Gergana Mineva, Private Office Advisor at Engel & Volkers Dubai. People still want waterfront living on The Palm Jumeirah and not just single-family homes. While the pandemic has shown the importance of space and privacy through the increase of sales in the single-family home market, a mansion in the sky with a resort-style lifestyle sans the hassle of maintenance may be the better option. We are offering a selection of luxury apartments across Dubai’s waterfront luxury communities. This type of properties are usually designed to offer more living space and indoor/outdoor amenities that include dining and sports facilities. During the pandemic, we actually sold a significant number of units to international buyers, which make up 30% of our buyer pool. People still want the resort-style luxury experience.”
The renewed foreign investment provides a market also for smaller units. “The foreign buyer is looking for resort-like homes that are practical and functional with a sense of sophistication and luxury that they can return to once or twice a year that can be maintained for them. The upcoming fully furnished South Beach Holiday Homes tower offer middle size units with dedicated property management options. This project has become very successful with international buyers.”