Showing early signs of recovery, sale prices of residential properties in Dubai will continue to pick pace in the long run, a report by Morgan Stanley has said.
“Robust demand, peaking supply growth and long lead times for new projects could lead to a tighter-than-expected market over the next several years,” Bloomberg reported, citing the report on Dubai’s property market.
Government reforms in the past year and appealing mortgage rates in Dubai’s property market have bumped up demand for residential properties, the report added.
COVID-19 AND DUBAI'S RESIDENTIAL REAL ESTATE
Already facing problems of chronic oversupply, the 2020 pandemic resulted in high availability of residential units, after expats exited the country according to a report by S&P Global, which noted there was an 8.4% drop in population.
Residential sale prices in Dubai’s property market were already on a downward trend since 2018, according to Knight Frank. Things started to look up after transaction volumes in 2020 registered the strongest start the market had seen since 2017. However, they eventually ended up falling by 14.4% year on year as of June 2020.
LUXURY HOMES BOLSTER ROAD TO RECOVERY FOR DUBAI'S PROPERTY MARKET
The current dip in residential prices is attracting wealthy home buyers to Dubai’s property market. A record 84 luxury homes, worth upwards of USD 2.7 million, were sold in March 2021.
Further, an uptick in the sale of luxury villas, sea-view apartments and second-hand family houses has brought much needed reprieve to Dubai’s property market. While apartment prices were still falling in February, high-end villas saw prices stabilise.
Villa prices rose 3.9% in Q1 this year, buoyed by interest from international investors. They also registered a growth of over 137% in Q1 transaction volume, as compared to the previous period. Comparatively, apartments registered a growth of 41% in secondary market transactions for the same period.
Overall, recovery is expected to be subdued, with tailwinds expected only after 2022. The S&P report expects Dubai residential real estate to be shored up by cutbacks in new supply and launches, low mortgage rates and declining residential prices in Dubai’s property market.
Transaction volumes, including those in the secondary market, will continue to remain strong, and villa prices will be more resilient, the report anticipates. In the interim, an oversupply of residential units is likely to keep the pressure on for property prices, and real estate stock as well.
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