BackThe 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
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
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.
