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CBUAE forecast: UAE real estate on recovery track, economy to grow by 2.4%

Abu Dhabi Skyline
Despite a slowdown in the non-oil GDP last year, including in the UAE real estate market, the CBUAE expects non-oil real GDP to grow by 3.9% in 2022.

The Central Bank of the UAE (CBUAE) recently released its Financial Stability Report 2020, noting that the UAE economy is expected to grow by 2.4% in 2021, with non-oil GDP projected to grow by 3.8%.

By 2022, the CBUAE further expects a full recovery, with total real GDP growing by 3.8%, and non-oil real GDP by 3.9%.

Last year, the country’s GDP fell by 6.1% owing to the economic shocks of COVID-19, including a downward trend in real estate prices, and the OPEC+ agreement to reduce crude oil production.

In order to support different economic sectors last year, including UAE real estate, the CBUAE announced the Targeted Economic Support Scheme, or TESS. 

As part of the scheme, the required mortgage down-payment on owner-occupied residential properties was reduced by 5 percent points for first-time buyers. As a result, mortgage portfolios in the banking sector grew by 8.1%, as compared to 2.7% in 2019.

Here’s what the CBUAE forecast for the UAE real estate market in the country in its latest report.

CBUAE’S REPORT ON UAE REAL ESTATE LAST YEAR

The report noted that residential real estate sales and rental prices in Abu Dhabi and Dubai continued to decline last year, whereas supply of residential real estate reached around 2,900 units in Abu Dhabi, and 38,900 units in Dubai.

During the year, residential sales prices dropped by 2%, and residential rental prices by 4.3%, in Abu Dhabi. In Dubai, they fell by 5.5% and12.2% respectively. Yields also dropped in Dubai, but picked up slightly in Abu Dhabi, the CBUAE report said.

The number of sales transactions in Dubai also dropped by 15.6%  due to a decline in sales of properties under construction. Further, the number and value of off-plan properties in the emirate also dropped sharply by 31.9% and 37.3% respectively.

Elsewhere, work from home models and closure of international borders led to a slowdown in the commercial real estate market, the CBUAE reported. In Abu Dhabi, office rents dropped at 1.9% (as compared to 4.3% in 2019), whereas in Dubai, they dropped by 7.5% as compared to 6.1% in 2019. Meanwhile, the average hotel occupancy rate in Dubai and Abu Dhabi fell to 54% and 66%, much lower than the 5-year historical average.

Lending to the UAE real estate sector slowed marginally — 7.4% in 2020 as compared to 7.9% in the previous year. Residential properties dominated the UAE banking system’s portfolio of UAE real estate loans, followed by commercial buildings, and real estate developers. Hotels, entertainment and leisure, shopping complexes and labour camps, and working capital altogether took up about a quarter of the portfolio exposure.

 

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