According to recent studies, Dubai's real estate market is beginning to feel the effects of the COVID-19 pandemic as widespread travel bans and quarantine measures aimed to curb the spread of the virus stop investors from investing in housing.
According to an analytical company ValuStrat, Dubai off-plan sales volume in March 2020 decreased by 42% compared to February, and the average capital cost of real estate decreased by 10% year-on-year.
Today, buyers can buy property in Dubai at almost 2012’s prices, and the per square feet cost fell to AED933 10,076 (US$254).
“The COVID-19 pandemic began to show its impact on the emirate’s economy and real estate sector in the second half of March, when property demand declined due to the “Stay at home” campaign started in support of a nationwide disinfection program,” the consulting firm said in a statement.
In another analysis, another consulting firm, Asteco, reported that prices for apartments, villas and offices in Dubai fell by an average of 11-12% compared to the first quarter of last year.
However, the real annual demand and prices expectations for 2020 have yet to be revised, since the indicators of the first quarter were mainly recorded before the pandemic, and therefore we can expect their further decline.
“Price cuts are becoming more likely in the event of a long recession,” said Elaine Jones, founder of Asteco.
Real estate sales in Dubai have been hit hard, as travel restrictions make it difficult for potential buyers to view homes. Widespread restrictive measures and quarantines imposed by governments around the world also deter potential foreign investors from the UAE real estate market. And many local buyers also temporarily suspended their real estate investment decisions due to the same blocking measures.
“Experts have predicted that sales this year will either decline or recover, completing a correction cycle that led to lower property prices and lower rents,” the Asteco report said.
“Before the COVID-19 pandemic, the market was growing in terms of real estate sales. At the moment, this trend seems to have ceased. And yet, it is too early to assess the longer-term economic impact, if any, of COVID-19 on the UAE's real estate sector,” says Hyder Tuyma, Head of Real Estate Research at ValuStrat.
However, there is light at the end of this tunnel for property owners. The government recently launched initiatives and reforms to cope the oversupply and stimulate investors’ interest.
Asteco reports that the supply of new apartments decreased significantly in the Q1 of 2020, when 5,750 units of real estate were handed over in Dubai, which is almost half of the 8,000 units delivered in the previous, last quarter of last year. The number of new office premises has also reduced by almost a half, from 1.25 million square feet introduced to the market in the last three months of 2019, to just 500,000 square feet delivered in March 2020.
Apartments, villas and offices rentals continued to decline, by 3%, 2% and 3% per quarter, respectively. On a year-on-year basis, the decrease was 12%, 9% and 12%, respectively.
As for prices in the sales sector, apartments, villas and offices became more affordable by an average of 2% per quarter and by 11-12% per year.
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