The re-awakening of Dubai's real estate market

 If you ask a real estate agent, they’ll often tell you there is never a bad time to buy, but ask a bank and you’ll likely get a very different answer.

So when HSBC describes Dubai’s real estate comeback as ‘remarkable’, and they’re echoing similar sentiments expressed by Morgan Stanley, you begin to suspect that it’s more than mere hyperbole. '

In their respective recent statements, HSBC Holdings said a growing demand for larger homes during the pandemic will further boost Dubai’s property market, while analysts at Morgan Stanley expect the rally to last for “several years”.

“The reported sales rebound in Dubai year-to-date has been remarkable,” HSBC’s Stephen Bramley-Jackson and Alok Baid wrote. Despite supply concerns and negative population growth, “the globally synched post-pandemic migration to larger homes is also reigniting Dubai’s residential property market,” they said.

HSBC even raised its recommendation on Dubai’s top developer Emaar Properties to buy from hold, saying the stock offered more than 90 percent correlation to property prices.

The statements put a smile on the faces of some in real estate, such as Lynnette Abad Sacchetto, director of research and data at Property Finder, who took to social media to say: “Great to see other industry leaders echoing what we have been saying since last year, the proof is in the data and demand trends.”

And the change is more that sentiment, its evidenced in the figures, says Sacchetto, with Dubai’s real estate market witnessing the highest value of sales in April for over four years, with transactions totalling over AED10.97bn, according to the latest figures from Property Finder.

The number of sales increased month-on-month by 4.2 percent and 0.6 percent in terms of value and brings the year-to-date total to 16,577 transactions worth AED36.12bn ($9.83bn).

In April, 70 percent of the total transactions were up to AED2m, while 23 percent were between AED2m to AED5m, 4 percent were between AED5m to AED10m and 3 percent above AED10m.

“The dynamics in the residential real estate market in 2021 have been interesting thus far. In April alone, we have seen six villa transactions over AED50m, with one on the Palm recorded as the second highest villa transaction in 2021 worth AED105m,” says Sacchetto.

“When looking at the mortgage transaction data, we have seen that April, March and January of 2021 had the highest number of monthly transactions since March 2010.”

In April 2021, 60 percent of all transactions were for secondary/ready properties and 40 percent were for off-plan properties.The off-plan market transacted 1,934 properties worth a total of AED3.09bn ($841m) and the secondary market 2,898 properties worth AED 7.89bn ($2.15bn).

Compared to March, the number of off-plan transactions last month increased by 12.9 percent, the highest in 14 months and the secondary/ready property transactions decreased for the first time in 11 months by 0.92 percent.

“In the past few months, we have seen the highest amount of off-plan transactions month-on-month since February 2020 as the off-plan sector seems to be picking up again. Developers are attracting foreign investors with attractive pricing schemes and capitalising on the new visa regulations to attract foreign direct investment,” according to Sacchetto.

Emaar Properties, Dubai’s biggest developer, saw five-month sales surge by 250 percent year-on-year. The company put total property sales at AED10.5bn ($2.9bn) compared with AED3bn ($816.9m) a year ago.

“I am confident that the Dubai property market is once again a growth story for developers, in light of the UAE’s wise policies, with Emaar perfectly positioned to capitalise on this,” founder Mohamed Alabbar said in a statement.

Dubai Land Department (DLD) has witnessed the surge too, with a total of 25,455 real estate transactions worth AED92bn ($25bn) registered in the first four months of 2021, an increase of 51 percent in terms of volume and 72 percent in terms of value compared to the same period in 2020.

According to their real estate bulletin, 8,749 new investors entered the market during January to April, representing 65 percent of the total number of real estate investors registered in that period, and up 54 percent on the year-earlier period.

“Dubai’s real estate sector has maintained an accelerating growth since the beginning of 2021, which confirms the flexibility and attractiveness of the sector as well as the positive impact of the decisions and directives of the wise leadership, which, in turn contributed to enhancing investor and customer trust in the sector,” said DLD in a statement.

It added that the real estate sector in Dubai will “continue to attract more real estate investors, thanks to its strong infrastructure and attractive investment opportunities”.

Leading the charge in Dubai is the luxury sector, or so says one leading real estate agent, revealing that demand for high-end properties is currently outstripping supply in Dubai.

Dubai-based real estate agent Chris Boswell tells Arabian Business the first quarter of this year had been “quite possibly one of the best quarters since 2007-2008 and says he has closed over $56m in high-end sales since the start of the year – several in collaboration with co-listing agent Barnaby Crompton.

“For the first time in years, demand completely outweighs supply in Palm Jumeirah villas and plots/villas on Jumeirah Bay Island. Not only are villas on Palm Jumeirah selling fast but at record prices per square foot. It really has been a frenzy of late. My clients are tired of the high taxes and not feeling safe in their inner cities and many feel let down by the way their governments handled the Covid situation. What really is paramount for many is the safety and security that the UAE offers.”

The value of transactions of luxury Dubai residential property in the first quarter of 2021 rose by 25 percent compared to the year-earlier period, according to a research by Luxhabitat Sotheby’s.

Boswell reveals buyers are coming from Europe, the US and the Far East and is currently representing “several well-known ultra-high-net-worth individuals, sports personalities and leading names in the entertainment industry” as they look to make Dubai their primary residence.

And, according to consultancy firm Knight Frank, Dubai remains a place to seek out bargains for buyers with deep pockets.

A million dollars can buy 165 square metres (1,776 square feet) of space in Dubai, around five times more than in London or New York. The emirate has 42,356 homes valued at $1m, second only to the UK capital.

Boswell says: “The international high-net-worth community realised in late 2020 that Dubai was a secure place to reside during the Covid lockdowns across the world.

“I feel that many immediately recognised the value in Dubai and all the amazing things the city has to offer and that prime waterfront real estate was incredibly undervalued by comparison to other major cities around the world. In addition they felt safe and secure under an umbrella of great leadership through an incredibly challenging and difficult time.”

More data, should you need it, showed that the average quarterly residential property prices in Dubai rose for the first time in seven years in the first three months of 2021, according real estate consultants ValuStrat.

The ValuStrat Price Index (VPI) showed an average quarterly improvement of 0.8 percent, as the first three months of the year saw accelerated positive trends for the first time since 2014.

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