When economies around the world were struggling due to the pandemic-induced crisis, the real estate sector in Dubai was scaling new heights. In the first quarter of 2021 itself, the segment recorded more than 12,000+ transactions and later witnessed a rise of about 51% in the last quarter since Q1, 2021. With more foreign buyers entering the market and some headwinds in the pipeline, the Dubai realty market, for now, continues to be a hotspot.
Undoubtedly the growth of Dubai real in the year 2021 has been phenomenal in many ways. In fact, backed by years of robust infrastructure and population growth, the market outperformed major global property markets, recording the highest residential capital growth of 17% in 2021.
In terms of transactions also, the Dubai realty segment has caught the eye of a significant number of buyers. As per the data of the Dubai Land Department (DLD), sales have picked up and the total number of real estate transactions also witnessed a rise of 51% as of Q4, 2021 as compared to Q1, 2021.
So, what has really spurred this overwhelming growth? Taking you through such developments, at Square Yards, we present you with some of the plausible factors which influenced the Dubai realty segment and how it will shape the realty sector in the year 2022 as well. Let’s dive in!
Year 2020 in retrospect
The global disruption caused by COVID-19 has had a lasting and significant paralyzing impact on the economies around the globe due to movement restrictions, that altogether changed the way markets used to work and function. Dubai’s realty segment was no different. According to the data, the vibrant real estate market in Dubai, which recorded more than 10,000+ transactions in Q1, 2020, witnessed a sharp drop in sales recording transactions of only 5,571 units in the pandemic-hit second quarter of 2020.
This hit to the realty sector resulted in major real estate giants and authorities announcing relief packages in 2020 across their segments. Such packages included deferred payments plans, rent reliefs, and waivers of selective charges to encourage their customers and business partners to sustain the evolving market.
It was pretty evident that the strong leadership portrayed by the stakeholders in Dubai created a safe haven for people in times when the rest of the world was still struggling with the crisis. Reverberating the regained confidence, the realty segment once again witnessed strong demand and the sales climbed back to 10,000+ transactions in the last quarter of 2020. However, the property market was up for a dramatic recovery!
Road to recovery strengthens in 2021
Despite the challenges faced by the real estate sector, the transition into a recovery phase was facilitated by the authorities in the most efficient manner. Apart from the vast scale rollout of vaccination drives, the government came up with various game-changing visa initiatives that impacted housing demand positively. Some of the Visa initiatives involved ten-year residency for expatriates, five-year renewable retirement visas to individuals/families meeting specific conditions. A new self-sponsored remote work visa allowing employees from other countries to live in and remotely work from UAE was also introduced, even if their companies were located in other countries.
The flexibility such visa reforms provided to the investors entailed the real estate market more attractive for overseas property buyers than ever before. Adding on to it, during Q2, 2021, the local banks further dropped mortgage rates to increase their share in the growing property market. According to the data revealed by Mortgage Finder, as the market revived over the last few quarters of 2020, propelled by an all-time low-interest rate, demand for mortgages in Dubai also grew exponentially by 68 percent in 2021 as compared to 2020.
These major initiatives in addition to lucrative offers by developers and lenders pushed more buyers to take forward a plunge of faith when it came to investing in Dubai real estate. Approbating the same, the number of transactions also saw a rise of about 6,000+ transactions in Q4, 2021 as compared to Q1, 2021. Adding on, as per Dubai Land Department (DLD) the estimated worth of real estate transactions stood strong at 15.74 billion for December 2021. This strongly indicated the revival of the Dubai realty segment and the year 2021 marking tremendous growth.
Some expected headwinds!
The Dubai property segment showed remarkable growth in 2021, as the average home prices rose by about 9.3 percent and rents increased by 8.3 percent. Also, this price growth has been the highest since 2015 for both the sale as well as rental markets. All these numbers were attributed to the strong demand from buyers and tenants.
However, with developers mulling on tightening their payment plan offerings and major banks likely to edge up the mortgage rates, the market in 2022 is expected to face some headwinds. These reforms such as increasing mortgage rates, revising of payment plans, rising average price of the property, to name a few, are expected to reduce demand for a while, although the transaction volumes are expected to remain robust throughout 2022.
What’s in store for 2022?
Looking forward to 2022 and beyond, given the conducive environment provided by authorities and the real estate segment buoyed by strong demand, the market is expected to continue its growth in the years ahead as well. Be it a continuous influx of new capital, foreign investors eyeing expensive properties, or the cautious release of new supply by developers- you name it, and the Dubai realty segment has all the factors aligned. This is expected to boost the Dubai realty segment to scale new heights as new catalysts continue to emerge.
However, how the market will sustain its strong demand amidst inflation and interest rates hikes is worth watching.
