Original Article by: Gulf Business
What a year this has been for real estate in Dubai. Despite the crisis and the roller coaster ride we saw in transaction flows and buyer sentiment, we are currently in a very interesting
Prices are now stabilizing in prime areas where supply is low, and in some places, rates are also rising. We are starting to see multiple offers for properties in these areas as well.
Going back to the start of the year, in January and February of 2020, Dubai’s property market saw month-on-month increases in real estate transactions following similar trends from H2 2019.
During these two months, the enthusiasm for Expo 2020 was still strong, and this was seen in the transaction volumes. This trend, of course, came ahead of concerns of Covid-19, which started to heighten in March.
There was a 12 per cent year-on-year rise in overall transactions in January 2020, with the figures growing 33 per cent year-on-year in February, with an incredible 76 per cent rise in off-plan transactions.
Individual investors were looking at this period as an opportunity to invest in a city that was going to be hosting the biggest show on earth, Expo 2020, and this interest was also backed up by the enormous amount of surplus supply the market still had from the previous year.
Looking more broadly at the first quarter of the year, Dubai real estate sales transactions grew by 9.74 per cent when compared to the same time period in Q1 2019. In fact, Q1 2020 had the highest number of transactions since Q1 2017, with the market cruising towards what looked like would be a record breaking year.
But when the pandemic came to the forefront in March, it was obvious that we would see a slowdown in transactions. Due to the UAE government’s proactive policies and swift and innovative efforts, we made it through this tough period quicker than most. Innovative efforts from the authorities also helped the real estate market to start transacting again.
One such decision from the Dubai Land Department was the introduction of online property transfers. Once the registration trustee offices came back to work with 30 per cent of their workforce, those looking to close a deal could book an appointment a day in advance and email the documents. That way the interaction on premises was reduced to a minimum. The online procedure implemented during the lockdown remain in place, and property registrations now can also be completely done online.
Dubai was in full lockdown in April, partially in May and didn’t start opening fully until June. Hence, the entire second quarter was affected by Covid-19. Overall, Dubai saw 5,552 sales transactions in Q2 2020 worth Dhs10.86bn, down 38.7 per cent (9,062 transactions) and 42 per cent (Dhs18.78bn) respectively compared to the same period last year.
As the average property sales cycle is 45-60 days, we saw the biggest impact of the lockdown on the sales transactions in the second half of May, with volumes dropping to their lowest levels at the end of the month. While the secondary market saw 40 per cent of the transactions in Q2, off-plan accounted for 60 per cent of the transactions.
However, that trend began to change in June, when, for the first time since the crisis began, off-plan sales transactions volumes dropped below those in the secondary market. Real estate sales transactions also grew in June, with an average of around 570 properties sold in Dubai every seven days. Sales and rental enquiries were also up compared to last year for both apartments and villas/townhouses, with the highest increase in enquiries for villas/townhouses.
So why would people look to buy property right after the lockdown and during a pandemic?
The answers – pent-up demand coupled with attractive prices and lower down-payment and funds required – a move that was implemented by the UAE central bank during the lockdown.
A strong June laid the foundation for a faster recovery and we started to see patterns of a V-shaped recovery, characterised by a rapid rise following a sharp decline. We slowly started heading back to the transaction levels of February and early March 2020. August typically has been a slow month for Dubai real estate when compared to the rest of the year, but not in 2020.
According to Data Finder, the data platform under the Property Finder group, August 2020 saw a rise of 11.3 per cent in real estate transactions compared to August 2019. In previous years, the summer months were typically slower for real estate transactions in Dubai because of the holidays.
This year, due to the Covid-19 situation, many residents chose not to travel. This, coupled with pent-up demand and attractive pricing drove transactions higher. Looking only at the secondary market, August 2020 had 22.4 per cent more transactions than August 2019.
The key new trends that have emerged are as follows:
• Significant increase in short-term leads, especially in Dubai
• The percentage of searches for “pool” and “garden” have increased
• People are increasingly searching for bigger houses
• In rentals, the high price category units are the least affected
• Payment terms for rentals are significantly more important now. Landlords are accepting a higher number of cheques to ease the financial load on the tenants
• The percentage of searches for warehouses in commercial real estate is increasing
During the lockdown, search and demand data on Property Finder showed that people started looking for bigger properties, shifting from the traditional small family apartments to
villa/townhouses. This trend has grown significantly since the crisis started and continues to have an effect on the market.
Since the start of the pandemic, the ratio of sales transactions for one-bedroom units has fallen by over 10 per cent and for studios by more than 34 per cent. The ratio of transactions for three-, four- and five-bedroom units has increased by 9 per cent, 20 per cent and 15 per cent respectively.
When looking at the split between apartments and villas/townhouses, the volume of villas/townhouses sales transactions to the percentage of apartments increased gradually from a 12/88 split to now a 21/79 split.
In July, a total of 494 sales transactions were recorded for ready villas/townhouses, as consumers were looking for ready units to move into. This marks the highest number of villas/townhouses sold in a single month since transaction data was made available in 2008.