DUBAI – The residential market in the UAE is expected to remain in favour of tenants next year due to the derailed recovery process due to slowdown in the global economy and travel restrictions imposed by the governments, experts claim.
Industry insiders and senior executives said more downside risks are expected for Dubai real estate sector due to widening gap in demand and supply of residential units, leaving room for price decline and lower rents next year.
“The Dubai real estate market will remain in favour of tenants mainly due to the supply which does not seem to be matching the demand at this point,” said Haleema Humaid Al Owais, Chief Executive Officer of Sultan Bin Ali Al Owais Real Estate.
Sultan Bin Ali Al Owais Real Estate was established in 1972 and has grown to become a prominent real estate company since. The company operates as a holistic conglomerate with all functions of rental real estate like Facilities Management and Security under its own umbrella through its offices in Dubai and Sharjah.
“We expect more risk for the luxury or premium residential segment where prices and rents will experience a downward trend in the near future,” Ms Haleema stated.
Latest available data indicates that the average apartment rents fell by about 4% quarter-on-quarter basis and over 9% year-on-year basis so far. In the villa segment, rents fell 2.5% quarter-on-quarter basis and around 7% year-on-year basis in 2020 so far.
“Businesses will take time to recover while potential job losses, travel curbs and economic slowdown globally, there is a risk that demand for real estate — rental and sales — will take time to recover,”Ms Haleema said.
Apartment to Villa
As the property prices have experienced a decline during the past couple of years, rental too has experienced the snowball effect across the UAE. Residents who survived the Covid-19 shock and have stable finances have been moving from smaller apartments to bigger apartments and villas.
Hussain Haji of Moderna Consultants, said residents have been moving from high-end apartments to villas, even in places where prices stayed the same.
“Property has become more affordable for buyers and tenants and that is a good omen. As the business activity fully resumes in fourth quarter and growth numbers pick up next year, rental and property prices will stage a rebound by the end of 2021,” he added.
The real estate sector plays a big role in the UAE’s economy, primarily in Dubai. In addition, the other member emirates, notably the capital Abu Dhabi, have shown great strides in developing their local property market in the past few years.
According to the UAE real estate market first-half review by ValuStrat, the property sector’s contribution stood at 5.4%, or AED 80.2 billion for the UAE economy while in case of Dubai and Abu Dhabi it contributed 7.4% or AED 15.5 billion, and 3.6% or AED 28.7 billion, to GDP, respectively.
Ms Haleema said tenants are now looking for better value for their money.
“We have seen a shift in trend as families prefer villas with large outside areas and spacious apartments with balconies so they have enough space for socially distancing and family activity. This positive trend will help revive real estate and its contribution to the UAE economy,” she added.