Real Estate in Focus: A Recap of 2021

The real estate market picked up from where it left in the second half of last year - with a healthy volume of transactions. With the administration of vaccines and sound social distancing measures, the market witnessed a further resurgence - as demand and supply remained constant towards the second quarter of 2021. In this blog, we look at the major real estate trends that defined the international markets and Dubai.

An Overview of 2021

Key Takeaways

• Interest and Mortgage Rates are at an all-time low.
• Sound government measures such as, visa and citizenship reforms have helped to instill confidence among investors and end-users.
• Landlords reigned supreme as rental properties stood out with an increase of up to 11.5% in family-friendly neighborhoods.
• People are moving from apartments to villas and townhouses for more space, freedom and peace of mind as a consequence of the pandemic.
• According to experts at UBS, Dubai’s real estate market is undervalued among the top 25 global cities with an index score of -0.57, which is excellent news for potential investors.
• With EXPO in full swing, now is the time to invest in Dubai real estate.

Many factors have contributed to the remarkable recover of Dubai's real estate; such as the efficient handling of the pandemic, resumption of international flights, and the anticipation of EXPO; which in turn led to the rise in property values, jump in buyer demand, with banks lowering mortgage rates. This made the property market one of the few industries that really stood out during a difficult time.

According to the statistics from the Dubai Land Department, the real estate market has been marching along at an excellent pace for a while - several of the most expensive sales and rentals in Dubai were made at the start of the year. This trend is in stark contrast to property markets elsewhere in North America, Australia and New Zealand, where prices are stretching the limits of affordability.

Real estate is constantly evolving - trends come and go in short intervals, meaning that one has to keep a pulse on the developments as they happen. Fortunately, the fundamentals of the market more or less remain constant, and understanding them can help us understand the shifting patterns of the market. Those fundamentals include:
 

• Property Prices
• Inventory/Supply
• Market Cycles

It’s pertinent to note that property markets are highly localized; with different scenarios in every state, city and neighborhood, so long-term stagnation is out of the question.

From a Global Perspective

Property Prices

Property prices are affected by a number of factors; such as, the local buyer demand, and the supply that is available; either from the developers or sellers. As a rule of thumb, high demand and low supply causes prices to rise, and vice versa. Similarly, mortgage rates play a central role in dictating prices - with lower rates increasing the demand.

During 2021, the global property market jumped 11% on the back of increased demand and low interest and mortgage rates - with the median house prices hovering around $340,000. Moreover, when we consider factors such as inflation, interest rates, and income trends, the house-buying power of consumers jumped to 21% in 2021.

Inventory/Supply

As a result of economic uncertainties stemming from the pandemic, the supply remained low. In fact, supply of properties has been low over the last few years, and the pandemic only exacerbated that trend. This created a seller’s market, where listings are low and prices have increased dramatically; especially for high end properties.

Market Cycles

Real Estate goes through cycles - there are highs and lows; such as the scenario witnessed in 2007-2008. However, we believe that today’s scenario fares much better than previous setbacks because of stricter lending standards; resulting in better credit profiles, and the record-level of homeowner equity, which surpassed $1 trillion during the second quarter of 2021.

The Dubai Real Estate Market

The Rental Market

For landlords, the market has been nothing short of a goldmine. Rental properties soared to 11.5% in quiet and family-friendly communities during the second quarter of 2021 - mainly due to scarcity of supply. With the gradual easing of Covid restrictions and availability of inventory; both buyers and sellers are in a unique position to leverage to do busines in Dubai's real estate. The average rental price of an apartment in Dubai clocks in at about AED 90k per year in communities such as Serena, Damac Hills 2 (Formerly Akoya Oxygen).

According to our Leasing Director, Camila Pretorius, a noticeable recent trend is of people moving from apartments into townhouses and villa communities that offer pristine air, lush greenery and plenty of open spaces. Neighborhoods such as Jumeirah Golf Estates, Victory Heights, The Meadows, The Lakes, Greens and The Springs are in high demand.

Sales Trends

For sales, apartment and townhouse villa prices are still reasonable, with the supply being met by a constant demand from individuals looking to both invest and live. Several new projects are being built and many are on the market - drawing interest from Emiratis and expats; especially HNWIs. In fact, according to a report published by UBS, Dubai's real estate market is undervalued when compared to the top 25 global cities.

In the words of Sales Director Mark Castley, now is the time to invest - the market is moving at an incredible pace with new off-plan projects selling out in record time. For high-end houses, Dubai is witnessing a historic boom; capturing 2.5% of the property market share as people from all over the world view Dubai as a primary residence rather than just a lifestyle destination. The interest rate is also at an all time low - enabling a lot of people to buy their dream residence.

The Expo Effect

If history is an indicator of things to come, the property market of Dubai will skyrocket during and after EXPO. The event is poised to welcome more than 25 million visitors, who will get to experience unparalleled luxury that the city offers. Based on that, we predict that a vast number of people will be tempted to invest in the property market or find a second home in Dubai. Foreign Direct Investment (FDI) is also poised to be a gamechanger and help to attract people and workers from all across the globe. So, we expect a rebound to start from the end of the current year going into 2022.

What to Expect in 2022

Globally, the property market is expected to reach an equilibrium state, albeit in the second quarter. One of the key considerations is the involvement of millennials in the market, as they are hitting peak homebuying age. So, we expect a surge in demand from first-time homebuyers. Furthermore, new projects will be completed as import of essential building materials is not a problem anymore with the resumption of travel. Banks are also offering reduced interest and mortgage rates in most parts of the world in a bid to attract potential homebuyers and investors.

As far as Dubai is concerned, is at an all-time high and we expect this trend to continue into 2022. Furthermore, government initiatives; such as, vaccination drives, visa reforms, and record low interest rates will further attract people to buy property in Dubai. All in all, there is a positive sentiment in the market shared by both buyers and sellers; especially in the luxury segment. Properties that are priced at AED 10 million or above are witnessing a remarkably high market share of 2.5 percent - an unprecedented event. We forecast Dubai to be one of the few markets in the world that would find a common ground between buyers and sellers.

Read more...

• Dubai Real Estate Report - Q1 2022