Dubai Property Market Buoyed by H2 2020 Performance, says Chestertons

• Dubai apartment sales prices fell by 9.5% over 2020, with rental rates recording a more pronounced 12.4% decline Y-on-Y

• Villa sales prices in the emirate recorded a moderate decline of just 3.6%, while villa rents fell by 5.3% in 2020

• Residential sales prices and rents forecast to be more stable this year, although modest declines expected on average
   

According to the latest research by leading international real estate services firm, Chestertons, Dubai’s residential sector enjoyed a comparatively strong second half of 2020, supported by an increase in completed property sales and continued tenant demand across more-established villa communities.   

The findings, revealed in the latest Observer: UAE 2020 Review & 2021 Outlook showed that while the total value of residential property sales fell by almost 14% over 2020, to AED 55.46 billion from AED 64.34 billion in 2019, completed property sales gained pace over the second half of last year, reaching AED 21.67 billion, a 35.5% increase from AED 15.99 billion seen in H2 2019.

Villa sales prices recorded a comparatively moderate 3.6% decline in 2020, with the overall annual fall eased by a robust final quarter. Apartment sales price declines were more pronounced, falling 9.5% year-on-year, with continued unit completions continuing to place downward pressure on values. In the rental sector, villa rents witnessed an annual fall of 5.3%, while apartment rents fell by 12.4%.  

Chris Hobden, Head of Strategic Consultancy, Chestertons MENA

Chris Hobden, Head of Strategic Consultancy, Chestertons MENA said, “Dubai’s residential sector enjoyed a comparatively strong fourth quarter, with sales activity continuing to gain pace since mid-last last year. While residential rents continued to see steady falls, the pace of price declines eased in the final months of 2020, with the market-wide average bolstered by several villa communities seeing minor uplifts in achieved prices."

“Overall, we expect to see modest declines in both average prices and rents this year, with ongoing unit completions likely to hamper performance. Price movements will increasingly vary by location and property type though, and we expect healthy demand for completed villas, across more-established residential areas, to continue into 2021."

On an annual basis, villas at Palm Jumeirah and The Meadows / The Springs saw the lowest price falls, with prices declining by just 2.1% and 2.7%, respectively. Values across Jumeirah Park and The Lakes saw the highest annual drop, falling by 5.2% and 4.9% respectively Y-on-Y.

In contrast, several locations saw modest uplifts in average villa prices over Q4, primarily driven by strong resale demand. Average villa prices across Jumeirah Park increased from AED 720 per sq. ft. in Q3 to AED 725 per sq. ft. in Q4, with average prices in Palm Jumeirah rising from AED 1,860 per sq. ft. to AED 1,870 per sq. ft. last quarter.

In the apartment sales sector, prices continued to fall, although the rate of decline eased in Q4. The largest annual price declines were witnessed in Discovery Gardens, with prices falling by 13.5% annually to AED 498 per sq. ft. from AED 576 per sq. ft. in Q4 2019.

Dubai Sports City and Motor City also saw comparatively sharp declines Y-o-Y, falling by 13.3% and 12.8% respectively. Prices averaged AED 600 per sq. ft. in Dubai Sports City, with Motor City prices decreasing to AED 510 per sq. ft.

Business Bay and Dubai Marina witnessed more moderate declines over 2020, with prices falling by just 3.7% to AED 973 per sq. ft. and 4.9% to AED 980 per sq. ft. respectively.

In the villa rental sector, rates fell by 5.3% on an annual basis. The Springs, Al Furjan, and The Meadows saw the steepest yearly declines, with rents decreasing by 10.1%, 7.5% and 6.9%, respectively. The Lakes, Victory Heights and Arabian Ranches all saw annual declines of above 5%, with a four-bedroom unit in each community averaging AED 212,000, AED 142,000 and AED 155,000 per annum, respectively.

While all areas saw annual declines, Q4 witnessed relative stability in average villa rents, with the majority of locations seeing rates hold steady, and a minority seeing modest improvements, leading to an average Q-o-Q drop of just 0.2%. Palm Jumeirah, Jumeirah Golf Estates and Arabian Ranches all recorded slight uplifts in average rents over Q4. Palm Jumeirah saw rents rise by 0.9%, with Jumeirah Golf Estates and Arabian Ranches seeing upticks of 0.4%, respectively, Q-o-Q.

“With work-from-home policies continuing across parts of the private sector, and tenant demand for larger residential accommodation likely to remain strong, we expect villa rents to continue to outperform the wider residential average over the coming year,” said Hobden.

For apartments, downward pressure on rental rates continued due to the economic impact of COVID-19, causing a year-on-year fall of 12.4%. The highest annual declines were seen in The Views and Discovery Gardens, at 16.3% and 16.2% respectively, with two-bedroom units in The Views averaging AED 100,000 over Q4. In Dubai Motor City rates fell by 15.9%, with three-bedroom apartments standing at AED 98,500, down from an average of AED 105,000 per annum in Q4 2019.

Studio units saw the sharpest fall over 2020, at 14.8%, followed by one and two-bedroom units, which fell by averages of 13.2% and 11.8%, respectively. Three-bedroom units declined annually by 9.2%.

2020 saw a significant slowdown in the number of new off-plan sales launches, with developers largely refraining from commencing new projects since Q1 2020. A total of 6,115 residential units started construction last year, compared to 18,650 in 2019 and 28,905 in 2018.

“We expect new off-plan sales launches to be limited in early 2021, with developers broadly reassessing project plans in the wake of an unprecedented 2020. We predict, however, that new launch activity will pick up as the year progresses, with Expo 2020 set to provide a backdrop to showcase new projects"concluded Hobde.

About Chestertons MENA

Chestertons MENA offers a full range of property services, including residential and commercial sales and leasing, investment agency services together with property management, strategic consulting and valuation services. In addition, Chestertons MENA has a very active international sales division, specialising in the sale of prime, off-plan and completed, central London apartments and houses to investors from across the entire MENA region with 34 offices across the UK capital.

With over 200 years of experience, Chestertons is one of the leading international property consultancy firms, in addition to one of the biggest networks of branches in London, Chestertons also has offices throughout Europe, reaching Australia and Singapore and a burgeoning Middle East network with offices in Abu Dhabi, Bahrain, and Dubai.