Dubai Real Estate Recovery Has a Long Way to Go

Buyers have scooped up prime Dubai homes in recent months, taking advantage of decade-low pricing, easy financing, and an economy that is open for business despite the epidemic.

Buyers Are Coming Back

Luxury villas, sea-view flats, and second-hand family homes have all seen an increase in sales, reviving a property market that had seen a significant drop in activity during the epidemic and had been in a five-year downturn before that. However, with rents still dropping and oversupply impacting one of the emirate’s major economic engines, the path to recovery will be lengthy.

The COVID-19 epidemic last year wreaked havoc on Dubai’s economy, which is dependent on commerce, tourism, and its worldwide image as a regional center for commercial services. As a result, businesses cut employment. Many foreign employees, who were required to keep up with demand in a sector that generated 7.2 percent of GDP in 2019, have departed.

However, once the lockdowns and curfews were removed, market activity stepped up in the past six months, according to estate agents, helping to stabilize prices for family houses and large beach and golf course homes.

Realtor Matthew Bate, whose firm Nest specializes in high-end villas, says business has picked up in recent months as citizens, locals, and foreign tourists have taken advantage of the chance to purchase.

“Coming out of the COVID-19 lockout, we had some distressed assets. “Right now, I’d say we’re back up to early 2020, early 2019 prices,” he added.

How Dubai Stabilize the Market Price

While most of the globe imposed new coronavirus limitations during the winter tourist season, Dubai welcomed tourists and launched one of the world’s most rapid immunization programs.

“We had a massive inflow of visitors… it brought a lot of people to Dubai… “The last couple of customers we had, who was dealing with properties worth more than 15 million AED ($4.08 million), owned homes in New York, London, and are now looking at Dubai,” he added.

Even though prices of high-class villas have stabilized, apartment prices in the emirate as a whole were still dropping in February, according to a ValuStrat pricing index.

According to S&P credit analyst Sapna Jagtiani, Dubai’s real estate market would not return to pre-pandemic values for another year.

“Prices are down 40% to 50% from their high in 2014… which is why we believe a price recovery to comparable levels would be difficult and long,” she added.

According to Jagtiani, rents at the end of 2020 will be approximately 5-10% lower than they were at the market’s previous bottom a decade ago.

The UAE’s long-term economic trend has been slow since the 2014-2015 oil price collapse, according to Christopher Payne, chief economist of Peninsula Real Estate, an investment and research firm headquartered in the UAE.

“Lower oil prices are also affecting population numbers; you have to reduce expenses, people are laid off, and people flee the country,” he said.

Survivability of Developers

“Developers are under a lot of pressure, primarily to manage liquidity and cash flow while delivering on time. Furthermore, pre-sales may not be very promising in 2021, resulting in lower profit and greater leverage,” Jagtiani added.

In the years after the 2008 financial crisis, the sector was hit by a wave of restructuring, and several developers went bankrupt.

Emaar is contemplating a buyout and delisting of its malls subsidiary, while establishment Meraas Holding is being placed under the investment scheme of the emirate’s leader, Dubai Holding.

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