Did property prices increase in Dubai Real Estate Market in Sept 2021?

The below report is taken directly from that published by PropertyMonitor for September 2021, who use only closed transactions data from Dubai Land Department.

"The Dubai property market’s recovery continues as prices rose for the eleventh month in a row, albeit with the pace of the recovery slowing. In September, prices climbed 1.2% to stand at AED 968 per sq ft. After recording a 2.15% gain in June, monthly price rises have been slowing, recording 1.89% in July and 1.6% in August, confirming our view that the recovery would switch to a more sustainable pace. The current price recovery is increasingly mirroring that of the previous cycle—during the 11-month period from bottoming out in November 2020 until September 2021, prices rose 17.4%. This matches a very similar increase of 18.2% during 11 months of Oct 2012–Aug 2013. We are now 19% away from the peak of the previous market cycle. Should the recovery slow to smaller and sustainable monthly price increases, there is a greater likelihood of the recovery lasting longer and the possibility of hitting a new market peak in the current cycle.

The recovery has, thus far, been powered by the strong performance of the villa and townhouse segments, especially in traditionally sought-after locations. However, as inventory dries up amid the seemingly insatiable appetite for this segment, a widening buyer-seller expectation gap regarding pricing is now conspicuous. Aggressive pricing by sellers and their brokers after blockbuster months for sales have led to overpriced properties staying in the market as buyers explore other options rather than indulge property owners’ demands. We therefore expect apartments to carry forward the recovery from here on, given multiple options available in the market and the greater headroom they have for price appreciation. The effect of EXPO opening has not yet been felt in the market, but will be a positive influence on the last quarter of 2021 and the first half of 2022 as new buyers discover the Dubai market and its relative affordability compared to other major capitals and financial centres. EXPO buyers are also likely to be attracted to this segment for reasons of affordability, plentiful supply, off-plan incentives, and ongoing ease of maintenance. Transactions in September came in at 5,670. This represented a 2.2% decline on a monthly basis, however it was the strongest September performance since 2013. Despite these encouraging numbers, it is atypical for activity during September to be lower than August, which is one of the slowest trading months of the year. This imbalance between August and September is probably a one-off with numbers for August 2021 likely boosted by a number of off-plan launches being announced. Year-to-date transaction volumes now stand at 43,405, eclipsing the 35,969 transactions recorded throughout all of 2020. With three months remaining, we are on track to reach total sales transaction volumes of ~58,000 and record numbers that were last seen during the boom years of 2013 and 2014. A total of 2,527 off-plan transactions were registered in September, down 2.1% on month but higher by 42% on a yearly basis, given the fewer number of new launches in the same period last year. Off-plan transactions claimed a 44.6% market share compared to 55.4% for completed properties, continuing the trend seen since January of the narrowing gap between the two. This trend is likely to remain in place going forward as the existing unsold inventory with developers continues to get absorbed and new projects are launched.

Meanwhile, initial sales transactions—the first sale of a property from the developer for an off-plan or completed project—stood at 3,664 in September. Overall, these transactions have displayed strength over the months but recorded a marginal decline since August. At 2,221, the volume of mortgages decreased in September by 19.6% over the previous month. Part of this decrease is the result of last month’s record spike in mortgages for hotel apartments when there were 533 transactions recorded. Mortgages for apartments and townhouses fell by 17.6% and 21.1%, respectively, while loans for villas increased by 7.3%. Interestingly, in some villa communities, the volume of mortgages outweighed that of sales during the month. The reason for this could be the owners opting to refinance as their fixed terms end, or withdraw equity for renovation activities, a trend that is being currently witnessed in several popular villa communities. Breaking down the mortgage market further shows that bulk transactions (mortgages taken by developers and larger investors for multiple units) comprised 36.6% of all loans issued and were spread across several projects, most notably Building 3 Zen Cluster in Discovery Gardens (169), Ajmal Sarah Tower in Dubai Residence Complex (71), and MBL Residence in Jumeirah Lakes Towers (59). Another 28.5% of loans taken were new purchase money mortgages for residential properties that were also transferred during September, primarily by end-users with the average amount borrowed being AED 1.93 m, an increase of 9% month-on-month, at a loan-to-value of 75%. The remaining 34.9% represents refinancing or new mortgages taken out in the months post transfer. Rental yields have continued to fall for a second month after momentarily recovering to 6.2% in July. Yields now stand at 5.7% in September, registering a monthly decline of 3.9%. After remaining relatively stable at ~6.5% through most of 2020, emirate-wide average gross rental yields are again weakening. This suggests that property prices are increasing in several communities—especially where people are buying for end-use—at a more rapid pace than rental prices, which are still declining in some communities, particularly those heavily comprised of apartments."

Lucy Parker is a British, Licensed Dubai Real Estate agent who has been living and working in the UAE for 8 years. For a personal appointment, zoom call or quick chat regarding any of the above information on the real estate market in Dubai, please whatsapp on +971 5857 11 070. ( please NO SPAM )