KHALEEJ TIMES, Tuesday, Jan 19, 2021 | Jamadi Al Thani 6, 1442
Dubai to add 39,000 home units in 2021
Emirates:
Dubai’s realty sector, which witnessed a surge in the supply of
residential units year-on-year in 2020 regardless of the disruptions caused
by the pandemic, is expected to add 39,000 units in 2021.
Last year, the market saw the delivery of nearly 36,000 units, marking an
increase over the number of units that were added to the market in the previous
year, according to data supplied by real estate consultancy Core.
Data from Asteco also shows that 2019 saw a total of 31,000 residential units
coming into the market in Dubai, comprising approximately 23,600 apartments and
7,400 villas. According to Data Finder, a total of 32,822 residential units in
the freehold and non-freehold communities were completed in Dubai in the first
nine months of 2019 and another 13,216 units have a completion date towards the
end of 2019 or Q1 2020.
“We conservatively forecast nearly 39,000 units for 2021, however, further
revisions are expected as forecasts will inherently depend on buyer confidence
and an uptick in market sentiment as developers continue to adjust to ongoing
market conditions,” said research analysts at Core.
In 2021, sales prices and rents to remain under downward pressure with apartment
districts expected to face further headwinds while established villa districts
that saw strong take-up over H2 2020 and now have limited supply are expected to
see price resilience, said the report.
Prathyusha Gurrapu, head of Research and Advisory at CORE, said while disrupting
the real estate market, the pandemic has also accelerated reforms. Measures to
curb supply are gradually showing effect with major stakeholders collectively
addressing Dubai’s oversupply
“Government-led demand drivers including a range of visa reforms, low-interest
rates and attractive LTV (loan-to-value) ratios for first-time buyers are
supporting and sustaining demand. These steps have also resulted in a slowdown
in the off-plan market and relative resilience in the secondary market with
record transaction volumes seen, largely led by end-user buyers,” said Gurrapu.
This year, secondary sales transactions are expected to be steady as underlying
demand is supported by lower capital values and demand drivers such as
financial, visa and social reforms. “ We expect new launch volumes to further
reduce in 2021 as developers re-strategize and focus on the absorption of
existing inventory.”
Gurrapu said although the impact of Covid-19 has pushed price recovery further
ahead, the market has started to witness resilience in sales prices as values
reach development costs in many districts. “Villa districts have particularly
fared well due to rising demand from occupiers requiring more space and open
areas as they adjusted to changes in working arrangements. However, apartment
districts maintain their downward trajectory and are yet to show signs of
plateauing,” said Gurrapu.
The Core report said despite a challenging 2020, secondary market transaction
activity saw an increase of 7.0 per cent over 2019 volumes. “Significantly lower
buying costs and a raft of government-led demand drivers are the biggest factors
currently supporting transaction activity. In fact, after the initial slump in
April and May 2020 due to movement restrictions, December witnessed the highest
monthly transaction volumes in two years.”
However, off-plan market activity contracted significantly by 32 per cent
year-on-year in 2020 as buyers preferred ready units to avoid further
uncertainty and we expect this trend to continue in 2021. “In line with
government directives and recent news of many major developers scaling back on
new project launches, 202 per cent compared to 2019 as developers increasingly
recalibrate and focus on existing inventories,” said the report.
In 2020, apartment districts continue to see sharp declines, with a few prime
districts such as Downtown Dubai (-4.0 per cent), Palm Jumeirah (-4.0 per cent)
comparatively bucking the trend. The more affordable apartment districts such as
Discovery Gardens (-15 per cent) and Dubailand (-15 per cent) have been the
weakest performing areas over 2020.
“Looking historically from the peak values of 2014, villas dropped nearly 31 per
cent while apartment districts dropped over 35 per cent with older districts
such as JLT and Discovery Gardens witnessing over a 40 per cent drop over the
last six years.
“However, the villa market has displayed relative levels of resilience with
lower year-on-year declines due to evolving occupier needs in the wake of
Covid-19. The Springs and The Meadows (+1.0 per cent)), Arabian Ranches (-3.0
per cent)), Palm Jumeirah (-4.0 per cent)) were the most resilient villa
districts with nominal changes in year-on-year sales prices, bolstered by a
strong Q4 transaction market performance,” said Gurrapu.
Rents in apartment districts, in general, have fallen sharper than villa
districts with a higher share of apartment districts witnessing double-digit
drops. The weakest performing apartment areas are Dubai Sports City (-19 per
cent)) and Dubailand (-19 per cent)). Villa communities witnessing the sharpest
year-on-year declines are Jumeirah Village Circle (-13 per cent)) followed by
Reem-Mira and The Villa in Dubailand (-11 per cent)). Prime villa locations like
the Palm Jumeirah (-4.0 per cent)) and Emirates Hills (-4.0 per cent)) have
shown resilience in rental drops, particularly in the upper end of the market as
high absorption witnessed over H2 2020 has resulted in limited stock currently
available in the market.
In 2020, from peak rents witnessed in 2014, villas dropped nearly 33 per cent
while apartment districts dropped over 40 per cent with many districts
displaying reductions over the 45 per cent mark over the last six years. As
rents fall at a faster pace compared to sales prices, yield contractions have
been witnessed across villas and apartment districts.
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