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Need of the Industry

UAE consisted of 7 emirates where law and legislations are heavily influenced by its religion, adopted Islamic beliefs- consequently as tax-exemptions through Islamic Banks policy. That is the main attraction for investors for UAE in comparison to other countries, where high tax implemented on foreign investments.  

Previously UAE had enjoyed many years of wealth and free distributions since 1971- that is one year after oil explorations. The country then came to realize that gears didn’t often stay on the peak too long, the country faced the largest struggles in 1998 when oil price drastically declined. Then, UAE has been pushed to develop in other facets and execute certain reforms- such as opening other industries domestically mainly the construction field and bring it to global trade and diversifications.

Real Estate Stability in Dubai

Since the reforms and private sector improvements, UAE market has started attracting massive foreign direct investments focusing on many areas including Real Estate business due to the tax-exempt rules and positive swing of the economy hence the promising land of opportunities. For many years Dubai has been heavily producing both residential and commercial buildings as well as other bigger developments and effectively matured its real estate industry within a short period of time. Successfully it keeps the country at the status of one of the wealthiest economies on the earth.     

Dubai is a fresh young and yet maturing and progressively transparent market where you can invest with confidence with your choice. The property market in Dubai is continuing to develop and get established; we can no longer discuss solely the property market alone, instead, we need to evaluate different segments of it.

COVID-19 impact

Sidharth Mehta, (Head of Building, Construction, and Real Estate, KPMG) states “Perhaps the Covid-19 pandemic has threatened our societies and healthcare systems; the consequences for the local economies are unprecedented but slowly recovering.” (sourced)

Nevertheless, the emirate’s construction production continues to grow, despite the soft weakening of market value. Although, pandemic significantly disrupted transactions, attractive prices and terms, however, still intimidate investors and residents to explore more investment opportunities.

The Central Bank of the United Arab Emirates has been implementing a 5% increase in the favorable loan-to-value ratio for first-time purchasers and a 50-basis discounted point in the benchmark interest rate. It is hoped that these measures will spur market activity and will help it recover sooner. Major developers are also running higher promotional offers and striking payment plans for properties sold off-plan, enabling buyers to start their payments at lower during construction.  

2020 market performance in Real Estate

Dubai’s mortgage market performed well in the first quarter of 2020, as the number registered increased by an impressive 104% compared with the first quarter in 2019. This was followed by a 60% drop between March and April 2020 – mainly as a result of Covid-19.

On the rental verge, some tenants may look for better quality assets at reduced rates and might, therefore, choose to relocate. On the other hand, tenants who are affected by salary reductions and job cuts are likely to be looking to downsize and move to more inexpensive options. This will present vacancies in some properties and additional downward pressure on market rents.

High sales transactions in 2019 carried over into 2020, as Dubai-based developers offered attractive payment plans with the aim of turning tenants into owner-occupiers, and banks offered competitive interest rates. As a result, there was a 10.4% increase in the number of sale transactions registered in Q1 2020 compared with the same period last year.

While the rental and sales costs declined by 1.5%-2.4%, the volume of transactions drastically increased in 2020. The trend of softening prices – which took place over the last few years – is projected to continue through Covid-19. Therefore, we expect Dubai to remain a buyers’ and renters’ market.

Source: https://assets.kpmg/content/dam/kpmg/ae/pdf-2020/07/real-estate-and-hospitality.pdf

Region Specific Real Estate Projection through the end of 2021

Many parts of the world, including South East Asia and Australia, suffered a massive property crash in 2020 as a result of the COVID-19 pandemic, while surprisingly the U.S. real estate market experienced significant growth during this time. The main reason to set it apart from other countries was the U.S. federal government’s verdict to keep low-interest rates that in turn stemmed in lower mortgage rates. U.S. citizens were able to secure inexpensive loans while other countries were experiencing property crashes. This fueled the demand for property and expects to cause further growth in the U.S. real estate market in 2021. 

Alternatively, Israel’s real estate market has currently festered since the property crash in 2020 since the renters delayed to pay their rent causing homeowners are unable to pay the mortgage installments- showing no improvements in the sector. However in Australia, while the property market is in a little growth after the 2020 crash, one could say many projects are on hold. Australia’s city-dwellers have been relocating to regional towns and cities and major cities are no longer the engines of the economy and global activities anymore.  

In the Asia-Pacific region, a renaissance of investments through cross borders and favorable deal-makings within the region is projected in 2021.

Change in the Horizon

The new trend of working from home has drastically shifted the investment potential of the major property types. The demand for industrial, warehouse, and distribution facilities is said to increase significantly in 2021 as people continue to do most of their errands online and virtual meetings are in places everywhere. The demand for commercial properties has shrunk due to the new situation but also because companies no longer need physical offices to run businesses as its encouraged to do business transactions remotely. In a nutshell, this pandemic has made a big change in real estate worldwide and wrought the demand of distribution facilities and manufacturing estates.

Changes to patterns of regime and comportment will absolutely determine pre- and post-Covid-19 eras. Thanks to UAE government initiatives undertaken at the time, the sector has matured and been more resilient since 2020.

We all comprehend that in order to move forward, we all must accept the new reality and evolve accordingly.

As Dubai gradually reopens, the emirate’s world-class infrastructure definitely assures more investors in the nearest future. Dubai is still in a fairly strong position with investors and consumers and has been up to strengthen business confidence. Dubai’s real estate and hospitality sectors will overcome the current crisis and continue to play a critical part in the nation’s economic growth. This is a new beginning – a time for us to redefine ‘normal’ and lead the change.

Optimistic Future

Experts agree that they are clearly positive about the near future of real estate industry in Dubai as the recovery process is firm. Perhaps now is the best time to buy any sort of real estate in Dubai. Estimation of 10% discount for purchasing a new development at this point, says Mr. Hussain Sajwani, Damac chairman told CNBC’s. Delivered the right time to invest in the property market while tenants should also be ready to pay more towards the end of the year after the recession mitigated.  

ValuStrat mentioned as cause of the experience of Covid crisis being resolved, the economy must to recover in 2021 and with the help of 50th anniversary of the UAE and the long awaited expo, property market should be able to pick up again and head towards improvement throughout this year.

Dubai will remain at the top of property investment options as the property price decreased and the impact of oversupply of developments.

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