While the cost of renting property in Dubai before COVID-19 was growing, today we can say that the rental market has turned to tenants again, and its stabilization will now take longer due to fewer transactions, as well as the uncertainty associated with the coronavirus pandemic, analysts say.
Because of COVID-19, when people are losing their jobs everywhere and their salaries are being reduced, co-living concept is also gaining momentum in the emirate in terms of supply and demand.
Thomas Matthew, assistant vice president of one of Dubai’s largest investment companies, believes that rental market will roll at least one step back in the rental cycle compared to the period before the pandemic, due to falling demand as the result of wide-spread job losses and salary cuts potential and existing tenants are experiencing now.
In the pre-coronavirus period, residential rental rates in the Dubai real estate market were bottoming out slowly, as the number of offers was limited. And now, with the onset of the pandemic and the decline in incomes, affordability becomes the dominant theme in the housing market, while rental prices will decline in the nearest future before starting to grow again.
As for the market supply with new offers, about 135,350 housing units will be added in the Gulf countires (GCC) in 2020-21.
In the residential property sales market, in contrast to the last crisis year of 2009, a more significant reduction in prices in the nearest future is likely to lead to an increase in profitability, given the currently widening gap in the yield-to-borrowing ratio.
According to property price monitoring by PropertyMinitor, the average rental price for apartments in Dubai decreased by 14 per cent, while the cost of renting villas and townhouses in the first quarter of 2020 decreased by 10 per cent, compared to the same period last year. At the same time, in the first quarter of 2020, more than 6,200 apartments and 800 villas and townhouses were handed over in Dubai.
Dubai's leading real estate consulting company also reported that in Q1 2020, the number of transactions dropped to 8,700 for villas, townhouses and apartments, compared to 12,444 in the Q4 2019.
Experts say that it is yet too early to predict when rental prices will restore in the current cycle of market development, since we still have to face and overcome all the consequences of Covid-19 that impede the full potential business activity. Moreover, the risks to the stability of employment and wages must also go away so that rents stabilize first, and only then begin a new round of growth.
Demand and option offers for co-living increase
Given the current global crisis caused by Covid-19, the new co-living concept is gaining momentum in Dubai.
Companies around the world are taking measures to prevent the spread of the virus, including sanitary and hygiene measures and social distance measures, as well as, and most importantly, introducing and supporting new work-from-home policies. In this regard, options for co-living represent a perfect environment for young professionals to work remotely in a community without having to get to work or rent an office.
In Dubai, the largest developer Emaar Properties promotes this concept as part of the Collective, Collective 2.0 and Socio projects at the Dubai Hills Estate. Other alike offers under development include the UNA project by Nshama and the Canvas project by Koa off Mohammad Bin Zayed Road.
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