Dubai property market 'making a slow but steady recovery'
DUBAI, November 17, 2021
A year after bottoming out, the Dubai property market’s recovery continues as prices increased by just under 1% in October to stand at AED977 per sq ft, according to UAE-based real estate portal Property Monitor.
After recording a massive 2.51% gain in June, monthly price growth continues to slowly lose momentum and for the first time in eleven months recorded a more sustainable month-on-month growth of less than 1%, it stated.
Although the monthly pace of growth is easing, the annual trend has continued to rise, after the market hit a low point in November 2020.
With property prices up 19.9% year-on-year and the current price recovery continuing to mirror that of the previous cycle, where the first 12-months prices increased 19.7% year-on-year during Oct 2012–Sep 2013, we still see further growth in the months ahead.
According to the report, the recovery has been powered by the strong performance of the villa and townhouse segments, especially in traditionally sought-after locations.
However, as inventory has dried up amid the seemingly insatiable appetite for this segment, a widening buyer-seller expectation gap has emerged, it stated.
"Aggressive pricing by sellers and their brokers, after blockbuster months for sales, have led to overpriced properties staying on the market as buyers look for value and explore other options, rather than indulge property owners’ inflated demands," remarked Zhann Jochinke, the Chief Operating Officer of Property Monitor.
"This leads us to confirm our expectations of the focus shifting to apartment sales where volumes have been more subdued, price growth slower and affordability more attractive for investors and new overseas buyers," he noted.
"This trend is likely to be supported by the impact of Expo 2020, bringing new buyers into the market attracted by the pricing and simplicity of apartment ownership," he added.
Transactions in October came in at 5,224 falling a further 7.9% on a monthly basis after a 2.2% decline in September. However, it was still the strongest October performance since 2015. Despite these encouraging numbers, it is unusual for there to be a slowdown in transactions in the month of October.
"We would normally expect to see activity follow the historic seasonal trend of month-on-month growth from September through November. This, coupled with the slowing pace of price appreciation are early indicators of the market cooling off to a more sustainable pace," said Jochinke.
Year-to-date transaction volumes now stand at 48,629, surpassing 2020 year-end numbers by more than 35%, and up by over 16.5% compared to 2019.
"Even in the face of this unseasonal slowdown in sales, with two months of the year remaining, we are on track to reach total sales transactions of 58,000 and record numbers that were last seen during the boom years of 2013 and 2014," revealed Jochinke.
According to him, a total of 2,078 off-plan transactions were registered in October, down 17.8% month-on-month but 63.9% higher on a yearly basis.
Off-plan transactions claimed a 39.8% market share compared to 60.2% for completed properties, stopping the trend since January of the gap narrowing between the two.
This is likely to be brief with the trend expected to resume going forward as the existing unsold inventory with developers is absorbed and new projects are launched, he stated.
On the future outlook, Jochinke said: "Looking forward, while the Dubai property market is starting to show signs of cooling off, it is likely that growth will continue although at a slower, sustainable rate of appreciation."
"Headwinds and downside risks are rising as property affordability in the villa and townhouse segments hits a ceiling locally and inflation continues to grow in the US and Europe," he stated.
Jochinke warned that this could raise the prospect of a tightening in credit policy, and make ever more likely the possibility of an interest rate hike.
"An interest rate hike would likely raise a barrier to purchasing for many enduser buyers and therefore have an immediate dampening effect on the property market, despite the prevalence of cash," he stated.
"However, the relative affordability of Dubai compared to other major global cities and the likely
influx of new buyers, could help the Dubai market out-perform even in a less accommodating credit environment," he added.-TradeArabia News Service
