Rise of the United Arab Emirates real estate market

The UAE real estate market has continued to recover to varying degrees across all asset classes, including residential, office and retail sectors, a trend that is likely to continue into 2022, according to a new report. report

The fourth quarter 2021 UAE real estate report from property management experts Asteco revealed a significant increase in activity and prices for the villas and townhouses segments, with this rally persisting from the first half of 2020 until ‘nowadays.

Asteco is led by HP Aengaar, Chairman and CEO.

2021 Highlights

Closures and the increased prevalence of working from home have led a number of residents to migrate to villas in search of larger spaces and private outdoor spaces. The report also showed that although the performance of the apartment sector was not uniform throughout the period, sales showed an increased level of interest since the start of 2021, activity and prices in most communities registering notable gains.

2021 trends weren’t exclusively driven by the pandemic. Expo 2020, which kicked off in October 2021, brought relief to both residents and businesses. Other major initiatives announced such as the Golden Visa and Retirement Programs, the release of the Dubai Urban Master Plan 2040 (April 2021), the successful deployment of vaccines and the strategic containment measures put in place by local governments and feds during the year also improved market sentiment.

The report indicates that the current trend of periodic emergence of new strains of Covid-19 needs to be examined, as well as how they affect the market in terms of value and activity in the short to medium term.

Abu Dhabi Market Outlook

The report states that the Abu Dhabi residential market saw the delivery of approximately 7,300 residential units in 2021, comprising 7,000 apartments and 300 villas. Most of this supply was delivered to Al Raha Beach on Yas Island. Additionally, several new projects were launched in 2021, including Noya Viva, Noya Luma, and Magnolia on Yas Island.

While apartment rental rates were relatively stable at the end of 2021, they saw marginal annual declines of 1% to 4% in Abu Dhabi. The declines were more pronounced in older buildings, where rents were not aligned with market rates.

Villas and townhouses continued to achieve high levels of demand, particularly within the well-developed villa communities located on Saadiyat Island and Yas Island. As a result, average rental prices for villas increased by 4% over the year, even though some developments recorded a surge close to 15%.

The office market was relatively stable in 2021, with the exception of lower quality office buildings where rental rates fell by 3% on average.

The sales market has been strong in 2021, especially regarding villa sales prices, due to the lack of high quality completed villas available for sale on the market. Villa sales recorded an average annual growth of 14%, mainly driven by existing villa developments on Saadiyat Island and Yas Island.

Similarly, apartment sales also showed increased demand, particularly in the last six months of the year, resulting in an average annual increase of 2%.

2022 will see several new project announcements and previously suspended projects to restart. The improvements in rental rates seen in the last six months of 2021 are expected to continue into 2022 and the villa sales market is expected to remain relatively active. The latest government regulatory reforms regarding business and foreign ownership, visas and the labor market are expected to boost demand for the residential and office asset classes.

Dubai Market Outlook

In 2021, approximately 17,000 residential units have been delivered, comprising 15,000 apartments and 2,000 villas, with communities such as Jumeirah Village Circle and Akoya Oxygen accounting for the bulk of completions. The commercial sector recorded the delivery of approximately 1.5 million square feet of new office space.

As expected, the start of Expo 2020 has pushed up real estate demand and rental rates. Rental prices for apartments and villas increased by 3% and 4% over the quarter and by 10% and 24% per year. Office rental rates have also increased by 4% on average over the past three months, although additional incentives may have influenced net effective rents. Year-on-year changes remained in contraction at 1%, according to the report.

In the sales sector, the sale prices of apartments, villas and offices continued their upward trajectory, increasing on average by 20%, 40% and 12% compared to 2021. The increase in supply and accessibility has opened the market to a wider pool of investors and has facilitated an increase in the number of end users and first-time buyers.

The report noted a marked increase in inquiries focused on quality properties at competitive rates, particularly in the villa segment.

The outlook for 2022 calls for new supply of nearly 30,000 residential units and 2 million square feet of office space, although as in previous years some of this supply is delayed and will eventually carry over to 2023. In light of greater supply slated for delivery in 2022, retaining tenants will become increasingly critical and rental rates across all major asset classes are expected to rise further for good quality properties, but at a slower pace. Sales price growth is expected to continue but moderate in 2022, in line with increased supply and the launch of new projects, he said.

Al Ain and Northern Emirates Market Outlook

While the other Emirates continued their upward trajectory, particularly in the residential sector, the dynamic of the Northern Emirates was more or less in line with previous years.

Despite the marginal fluctuation of residential rental rates in the Northern Emirates throughout the year, the last quarter recorded growth rates of 2% on average, compared to Q3 2021. However, the annual variations showed a down 1%, with the recovery concentrated towards the end of the year.

Selling prices and rental rates for apartments in Sharjah have remained more or less stable, with quarterly growth of 2%. Rental rates in typical apartment buildings in Ras Al Khaimah and Umm Al Quwain saw no change in 2021. Ajman, Fujairah and Sharjah noted marginal reductions of between 1% and 2%.

With government-led incentives, attractive developer/landlord offers and businesses returning to business, Asteco expects sales prices and rental rates to stabilize and in some cases increase in Sharjah. and in the Northern Emirates. – TradeArabia Press Service

About Tammy N. McFarlane

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