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UAE real estate market holds steady in H1 2021

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Transactions in the UAE real estate sector picked up, as the market shows signs of a sustained recovery.

The UAE real estate sector showed “positive signs of sustained recovery” during H1 this year, according to a new report by Kuwait Financial Centre ‘Markaz’.

According to the report, the UAE real estate sector saw transactions rebound during the first half of the year, driven by the vaccine roll-out, reopening of the economy, rising oil prices, events such as Expo 2020, and attractive yields in the sector. Going forward this is expected to result in a price increase, the report said.

The report also pointed towards investor-friendly initiatives, such as the golden visa and 100% foreign ownership of companies, that have resulted in positive sentiments for the UAE real estate sector.

Meanwhile, mortgage lending reforms, which include increasing mortgage lending limits by 5% last year, and removing property and mortgage transfer fees in Abu Dhabi, have further helped boost the sector. Dubai has also taken special steps to restrict supply through a new Real Estate Regulatory Agency law that raises upfront construction cost deposits to 50%, from 20%.

UAE REAL ESTATE SEES GROWING INVESTOR INTEREST 

Real estate prices in the UAE real estate market have remained depressed over the years due to a chronic oversupply. However, investors' interest is on the uptick on account of lower real estate prices, cheap and easy credit, and a recovering economy, the report said.

The number of transactions especially picked pace in H1 2021, especially in the secondary market. Resale transactions by value stood at AED 46.6 billion for the first half, nearly matching annual totals for 2019 (AED 48.8 billion) and 2020 (AED 49.9 billion). The primary market recorded sale transactions worth AED 15.1 billion for the period.

Residential gross rental yields stood at 5.8% for Dubai and 6% for Abu Dhabi, one of the highest across the world. For comparison, residential gross rental yields in Moscow stood at 4.5%, Cape Town at 3.9%, Singapore at 3.3%, and New York at 2.9%.

Demand for villas in the UAE real estate sector continued to rise, with prices going up 10% in Dubai and 6% in Abu Dhabi, as compared to the same period last year.

For the office sector, new supply of 70,000 square metres in Dubai and 18,000 square metres in Abu Dhabi is expected for delivery in H2. Meanwhile, office rental rates decreased by 1% in Dubai and 2% in Abu Dhabi year on year.

The retail market remains “subdued,” the report said, with the market remaining tenant-led. Meanwhile, the hospitality market saw occupancy pick up, with 58% hotel occupancy year to date May 2021 in Dubai, 61% in Abu Dhabi.

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