UAE’s Real Estate Sector Demonstrates Resilience Despite Pandemic

The UAE’s Real Estate sector has shown an unexpected level of resilience in the face of serious challenges created by the Pandemic, according to the Q4 2020 UAE Real Estate Report published by the Property Management company Asteco.

Although not consistently, Sales prices and Rental rates remained in contraction in 2020, primarily driven by the pre-existing supply-demand imbalance broadly in line with previous years and does not seem to have changed with the manifestation of Covid-19. At the end of 2020, an increase in Villa Sales prices and Rental rates for certain developments was witnessed, which was attributed to changing work/place and work-life habits.

According to the report, 2020 did not see a discernible change in the average trajectory of Sales prices and Rental rates. However, the supply – demand imbalance is likely to worsen over the course of 2021, similar to last year. The report noted that the longer-term trend towards remote working will also see a need for larger Residential dwellings and short term/serviced Apartments with more flexible Leasing and payment plans.

HP Aengaar, CEO at Asteco, said, “Covid-19 created an environment of uncertainty, which resulted in the need for pre-existing/emerging market trends to be accelerated, some of which are merely circumstantial while others are here to stay for the long run. Flexible and home working, use of advanced and smart technologies such as AI, automation, contactless technology, need for larger units with outdoor space and increased storage space and preference for lower density developments are some of the trends that will be taken over in 2021 and beyond.”

“There have been a number of positive reports suggesting that the economy is slowly moving into a recovery phase. However, given new lockdown restrictions in many parts of the world, it is widely perceived that the full economic impact and the pace of recovery is still uncertain and will ultimately be influenced by a range of factors, many of which are outside of the UAE’s borders,” Added Aengaar.

Regulatory measures and decisions taken by the UAE Government including a series of stimulus packages coupled with the global availability of the vaccine will significantly fuel the recovery of the market. The upcoming EXPO 2020 would also boost market sentiment.

Aengaar concluded by stating, “While the downward trajectory in the Real Estate market for the short term is unavoidable due to strained economic and market conditions, the medium and long term outlook for the UAE is more encouraging, fuelled by recovering oil prices, forecasted GDP growth, a proactive government response and clear focus on economic progress and sustainability”.

Key highlights:

  • During 2020, the Leasing sector benefited from the implementation of direct debit and credit checks, while the Sales market profited from reduced LTV (loan-to-value) ratios and lower interest rates for Expatriates and Emiratis alike.
  • The Government of Dubai has earmarked a total budget of AED 57.1 billion for 2021 and although reduced from 2020 (AED 66.4 billion), it takes into account the unprecedented economic circumstances and consequences of the pandemic.
  • Prevailing soft market conditions are likely to continue based on prolonged economic uncertainties.
  • In Abu Dhabi, approximately 15,000 Residential units are anticipated for completion in 2021. The majority of the upcoming supply is located within the following Investment Zones: Reem Island comprising approximately 1,850 units, Al Raha Beach with 4,000 units, Yas Island with 2,400 units and Saadiyat Island with 800 units.
  • Similar to 2020, Al Ain will see a limited amount of new supply in 2021.
  • In Dubai, 41,500 new Residential units and 1.5 million sq.ft. of Office space are expected for handover in 2021, a figure that could possibly increase if currently stalled/on hold projects resume activity.
  • With more supply expected for handover in 2021, Tenant retention will become increasingly important and can be achieved through competitive rates/incentives and proactive/professional Property Management.
  • In light of the pandemic, the Emirate of Sharjah rolled out a number of stimulus measures to support the economy, most notably a reduction in property Sales fees from 4% to 2%, for non-GCC nationals until the end of March 2021.
  • Despite these incentives, businesses resuming activity and attractive offers from Developers/Landlords Asteco expects further reductions in Rental rates and Sales prices across the Northern Emirates considering the economic uncertainties.

#GlobalTrendMonitor #trendingbusiness #RealEstate #Property #GCC #magazineUAE #magazine #mediaUAE #UAEmedia #UAEbusiness #myDubai 

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