UAE: New residential property supply slows significantly
Realty consultancies expect rentals to continue to rise in early 2022
The UAE real estate market continues to recover but the new residential supply slowed significantly in Dubai in the third quarter due to continued Covid-19 linked restrictions and delays.
According to real estate consultancy Asteco’s third-quarter report released on Monday, Dubai saw only 100 villas and 3,600 apartments while approximately 2,200 residential units were delivered in the third-quarter 2021 in Abu Dhabi, a slight uptick from 2,070 units offered in Q2 this year.
It’s estimated that 20,175 apartments and 2,900 villas will be handed over in Dubai while the UAE capital will see delivery of 10,300 apartments and over 300 villas this year.
In terms of sales prices, Dubai market sales prices recorded a significant surge, particularly in regards to villa units with average quarterly and annual increases of nine per cent and 37 per cent, respectively.
Asteco expects the momentum of growth to continue towards the end of the year and into 2022, albeit at a lower rate, a trend underpinned by anticipated developments stemming from the successful execution of the Expo 2020.
Kundan Choudhary, chairman of a real estate consultancy Stones, said demand for luxury properties increased from 20 to 30 per cent last year while this year it increased by 10 to 15 per cent. “Many investors are increasingly looking for sustainable, eco-friendly properties as they are keen on reducing their carbon footprint.”
Asteco noted that the underlying fundamentals pertaining to supply and demand may curtail sustained real estate market growth and make the recovery in sales prices more likely to be short-lived rather than a medium to long-term outcome.
In Abu Dhabi, apartment sales prices were relatively stable, with some developments recording an increase in demand, which was reflected by a rise in sales prices. New off-plan villa projects continued to record high levels of demand in Q3 2021. In addition, completed villas, particularly in high-quality communities, remained popular.
Villa sales prices increased significantly in the third quarter with an average growth rate of eight per cent, predominantly driven by existing villa developments on Saadiyat Island and Yas Island.
Rentals to rise 2022
Stones on Monday forecast a seven to nine per cent increase in rent for the residential and commercial spaces and a nine to 14 per cent increase in price for the luxury properties of UAE in the first quarter of 2022.
In Dubai, apartment and villa rental rates continued to record a notable upward trajectory in Q3 2021, with quarterly increases of three per cent and six per cent, respectively.
Asteco noted that villas were the predominant focus of demand and the limited number of new handovers translated into higher rental and occupancy rates.
“As expected, the start of the Expo 2020 has lifted real estate demand and rental rates. However, the currently perceived positive market sentiment is believed to be short-term considering the significant amount of upcoming supply,” Asteco said.
Abu Dhabi apartment rental rates were largely unchanged from the second quarter. However, apartment rates softened marginally year-on-year, registering a two per cent drop compared to the same period last year. Incentives such as multiple cheques, rent-free periods and waived/discounted agent commission fees boosted demand.
The villa rental market continued to flourish, particularly in well-developed villa communities in Saadiyat Island, Yas Island, as well as Raha, Golf Gardens and Bloom Gardens. Average villa rental rates increased by three per cent in Q3 2021, with some developments recording increments of up to eight per cent.
Unlike Dubai and Abu Dhabi, Northern Emirates real estate is yet to benefit from the easing of Covid-19 restrictions and improved market sentiment.
Apartment rental rates across the Northern Emirates softened marginally in Q3 2021, with average quarterly declines of one to two per cent.