Rental rates, prices will continue to be under pressure, says Asteco
Dubai is likely to see the delivery of more than 41,000 new apartments and villas in 2021, higher than the estimated 34,050 residential units that were completed over the course of 2020, property consultancy Asteco said.
The market is also likely to see 1.5 million square feet of additional office space this year, a figure that could go up if projects that were put on hold or delayed last year will resume activity.
With more property units expected to come into the market, rental rates will continue to be under pressure, Asteco said. Further pressure on sales prices is also expected, but at a lower rate of decline, with some developments likely to bottom out or possibly increase in value.
“Tenant retention will become increasingly important and can be achieved through competitive rates/incentives,” Asteco said in its latest report.
However, in terms of transaction volumes, the figures are anticipated to rise this year, as more people take a longer-term view of staying in the emirate.
Oversupply concerns
Housing oversupply concerns had been the dominant theme in Dubai for years prior to the coronavirus pandemic. Property prices and rents had been on a declining path and the trend became more pronounced as the economies worldwide grounded to a halt after the lockdown in March.
While new project launches eased in 2020 due to the pandemic, an estimated 24,850 apartments and 9,200 villas were handed over the course of the year. Although slightly lower than the initial forecast of 39,000 units, Asteco said last year’s handovers represent a “significant volume”.
“[It] is also somewhat surprising given prevailing oversupply concerns and the impact of the COVID-19 pandemic,” Asteco said.
Opinions are split as to whether the market has already bottomed out and is on its way to recovery. Last week, Cavendish Maxwell’s Property Monitor highlighted that, after months of remaining in a tight range, prices are strengthening, indicating that the bottom has been passed.
In an earlier interview with Zawya, DAMAC senior vice president Amira Sajwani said declines are expected to continue into 2021, and that a market recovery “will be a long one”.
Asteco said there is indeed optimism for 2021, in line with the global vaccine rollout and rising gross domestic product forecasts.
2020 highlights Apartment and villa rental rates declined by an average of 14 percent and 7 percent, respectively over 2020, according to Asteco. During the fourth quarter of 2020, however, villa rents didn’t show any declines, with some popular communities recording marginal quarterly increases of 2 percent to 3 percent.
Demand for villas went up during the pandemic as some tenants with stable incomes opted to upgrade to accommodations with bigger spaces and private outdoor living areas. Adversely, a number of tenants were forced to downgrade due to salary cuts, redundancies and uncertainties.
As for sales prices, the market continued to see a downtrend, with declines hitting 9 percent for apartments and offices, and 6 percent for villa units.
“Increased affordability and relaxed finance options opened the market to a wider investor pool and facilitated a rise in end-users and first-time buyers with focus on completed quality developments,” said Asteco.
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