Why Dubai property prices are likely to see further declines in 2021
Chestertons says new off-plan sales launches slumped in 2020 with construction starting on just 6,115 residential units compared to 18,650 in 2019
Property prices in Dubai are likely to fall further in 2021, albeit at a slower rate, despite a strong finish last year after the initial impact of the coronavirus pandemic, according to Chestertons.
The real estate consultants said 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.
Its latest research showed that while the total value of residential property sales fell by almost 14 percent in 2020 to AED55.46 billion from AED64.34 billion in 2019, completed property sales gained pace over the second half of last year, reaching AED21.67 billion, up 35.5 percent from AED15.99 billion seen in H2 2019.
Chestertons said villa sales prices recorded a 3.6 percent decline in 2020, with the overall annual fall eased by a robust final quarter.
Apartment sales price declines were more pronounced, falling 9.5 percent 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 percent while apartment rents fell by 12.4 percent.
Chris Hobden (pictured above), 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 percent and 2.7 percent, respectively. Values across Jumeirah Park and The Lakes saw the highest annual drop, falling by 5.2 percent and 4.9 percent respectively.
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 AED720 per sq ft in Q3 to AED725 per sq ft in Q4, with average prices in Palm Jumeirah rising from AED1,860 per sq ft to AED1,870 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 percent annually to AED498 per sq ft, from AED576 per sq ft in Q4 2019.
Dubai Sports City and Motor City also saw comparatively sharp declines, falling by 13.3 percent and 12.8 percent respectively. Prices averaged AED600 per sq ft in Dubai Sports City, with Motor City prices decreasing to AED510 per sq ft.
Business Bay and Dubai Marina witnessed more moderate declines over 2020, with prices falling by just 3.7 percent to AED973 per sq ft, and 4.9 percent to AED980 per sq ft, respectively.
In the villa rental sector, The Springs, Al Furjan, and The Meadows saw the steepest yearly declines, with rents decreasing by 10.1 percent, 7.5 percent and 6.9 percent, respectively. The Lakes, Victory Heights and Arabian Ranches all saw annual declines of above 5 percent, with a four-bedroom unit in each community averaging AED212,000, AED142,000 and AED155,000 per annum, respectively.
Chestertons said that 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 quarterly drop of just 0.2 percent.
Palm Jumeirah, Jumeirah Golf Estates and Arabian Ranches all recorded slight uplifts in average rents over Q4.
“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 percent. The highest annual declines were seen in The Views and Discovery Gardens, at 16.3 percent and 16.2 percent respectively, with two-bedroom units in The Views averaging AED100,000 over Q4.
Chestertons also said 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,” addded Hobden.
