The UAE real estate market remained strong during the second quarter of this year despite global headwinds and rising inflation concerns, showed the Q2 2022 UAE Real Estate Report by property management experts Asteco.
In fact, geopolitical tensions experienced globally raised the position of the UAE as a safe destination to visit, live, work, invest in, and study.
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The report also linked the increased demand for property to pro-active government reforms such as the introduction of the Golden Visa, and the transition toward a digital economy.
Around 1,300 residential apartments were delivered in Abu Dhabi in Q2 2022, spread across different areas of Abu Dhabi with the focus on Al Raha Beach and Al Reem Island.
Whilst there has been a significant rise in new project launches during the first half of 2022, several others have already progressed to the planning stage and are expected to start construction within the next 6 -12 months. The majority of these developments are located in Al Raha Beach, Yas Island, and Al Reem Island. A total of 3,400 apartments are expected to be completed by the end of this year in the emirate.
Apartment rental rates remained more or less the same as the last quarter, despite new leases in good quality developments being offered above market rates.
On the other hand, some owners are still offering reduced rents and attractive incentives to ensure swift take-up.
Meanwhile, villas and townhouses continued to achieve strong levels of demand, particularly within the well-developed villa communities located on Saadiyat Island as well as Yas Island. Although relatively stagnant over the quarter, villa rental rates increased by 5 percent on average over the past year.
Whilst rental rates in some developments have increased, they are still within the range previously recorded, hence showing limited average percentage change over the quarter. No major villa developments have been completed throughout the first two quarters of this year; however, the report expects 300 units to be delivered by the end of this year.
Asteco recorded no major changes in the office market over the last three months, annual drops were marginal at 1 percent.
As for the sales market, strong activity continued in the second quarter of 2022 with increases in demand and transactions. Although villa sales prices remained within the same range recorded last quarter, annual growth stood at 10 precent on average. Completed villas continued to be well received with emphasis on popular high-quality villa developments. As such, some of these communities recorded double-digit growth compared to the same period last year. Nonetheless, the lack of units available for sale in the secondary market has resulted in particularly high asking prices in several prime communities.
The first half of 2022 saw a number of successful and notable project launches in the Dubai market. These launches have come as a result of renewed optimism in the real estate market, which was initially bolstered by a strong secondary market. Developers are also eager to reinvest their profits in new project launches in order to capitalize on the current market conditions.
Apartment supply increased significantly from 6,000 units in Q1 2022 to 7,000 in the second quarter, and new villa handovers more than doubled to 520 completed properties. The vast majority of new deliveries were concentrated in new developments such as Damac Hills, Dubai Hills Estate, Wasl Gate, and Port De La Mer. Another 25,000 residential units are scheduled to be completed by the end of the year.
Rental rate growth continued with a similar momentum as last year; average quarterly increases reached 4 percent for apartments, 6 percent for villas and 3 percent for offices, whilst annual growth stood at 15 percent, 23 percent, and 13 percent.
Demand for larger unit types, particularly villas and townhouses with adequate useable outdoor areas such as balconies and gardens, and a strong community offering remained the focus for residents, thereby driving rental and occupancy rates.
Quality apartments in prominent neighbourhoods also recorded an uptick in interest -- not only in established communities such as Palm Jumeirah and Dubai Marina, but also in secondary locations with good community facilities such as those surrounding the Expo 2020 site (along the E311 and E611 corridor).
The positive benefits of Expo 2020, including infrastructure upgrades and the repurposing of the site, will undoubtfully be felt across a wide range of sectors for years to come, hence ‘the Expo effect’.
Expo City Dubai, formerly known as District 2020, is expected to open in October 2022 and is projected to become an independent free zone, as well as an economic and growth hot spot by featuring affordable housing and becoming a focal point for exhibitions, tourism, and logistics.
Asteco expects rental rates to remain elevated in the second half of the year. However, rental growth is expected to slow eventually.
Dubai continued to position itself as a safe and appealing destination for visitors and residents, despite the ongoing geopolitical dynamics, global uncertainty as well as rising commodity and energy prices.
Whilst many international markets are still recovering from past/recurring COVID-related lockdowns and restrictions, Dubai’s economy has made great strides. This economic rebound, boosted by higher oil prices and the revival in tourism and trade, resulted in exceptional transaction figures during the first half of the year, particularly with regards to off-plan properties. There has also been a marked increase in high-end/luxury residential unit sales.
Strong inward investment is expected to continue following several business reforms and Government initiatives, such as the Golden Visa, and the transition toward a digital-driven economy.
The UAE Cabinet had updated the long-term visa regulations in April 2022, stating that a Golden Visa (10 years) can be obtained when purchasing a property for Dh. 2 million. The property can be ready or off-plan, and it can be mortgaged through specific local banks.
Furthermore, in June 2023, the UAE will introduce (for the first time) a 9 percent corporate tax on domestic and foreign firms (below the global minimum), which is expected to provide a greater scope for the government to direct funds to priority sectors to achieve its growth and diversification goals in the long run.
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