People were sceptical about how Dubai’s real estate market would recover after the pandemic. Supply was at all-time highs, people were losing jobs or having salaries slashed and the tenant default rate was unpredictable. All this resulted in a 12% drop in rent and left owners worried about the future of the market. Very bleak outlook overall. As lockdown ended and 2020 came to an end, we witnessed an unexpected surge in the Dubai real estate market. This was because the world acknowledged and witnessed the UAE government’s response and management of the pandemic, the excellent work of the entire healthcare industry, the successful vaccination drive and how every citizen and resident positively contributed to the betterment of the UAE community. Of course, the long-awaited Expo 2020 opening and the improved laws for foreign investors also contributed to the surge in real estate investment. This combination allowed for rapid growth resulting in 135.4 billion dirhams in real estate transactions as of November 2021. Let’s look back and see how we got here, the trends observed, and what to expect going into 2022.
When the pandemic hit, the UAE was quick to respond and implement strict and necessary measures which allowed the country to keep the spread of the virus contained. The government also stepped in and enforced rental price regulations and caps in order to protect tenants. Once the vaccine was available, the UAE government made it free to all residents, it was one of the first countries in the world to reach a 100% vaccination rate. This allowed Dubai to return to the ‘new normal’ faster than the rest of the world, which fast-tracked the city as a travel and investment destination. The influx of tourists coming into the country combined with the government encouraging residency programs allowed a massive amount of foreign investment as tourists considered property in Dubai. May 2021 showed an increase of 197% compared to May 2020. And as the pandemic changed our lives, the real estate sector has also seen new trends and a shift in demand.
The need for space
As a result of the lockdown, people started to value bigger spaces. This resulted in a demand for villas and townhouses as well as larger apartments. The secondary villa and townhouse market saw a 15% increase. Within the apartment segment, buyers are now looking for two and three-bedroom units versus studios and one-bedroom units as traditionally seen in Dubai. Demand also showed a need and preference for spaces with more natural light, safe communal areas where they can multitask, and connectivity to all the places that matter.
More end-users
More end-users came into the UAE market as the supply of ready stock was high, tenants were looking for more space and mortgage rates were and are at all-time lows. Owning a home became more viable. This will continue into 2022 as prices normalize from all-time highs in 2021, especially for premium townhouse and villa developments. Making it easier to invest. Foreign investors will also continue to realize that, pegged against other leading international cities, rental returns in Dubai, even in a down market, are considered strong, averaging between 4 to 5% net. Add to that the low price entry point for freehold properties, high capital appreciation and low mortgage rates, it continues to be a no-brainer as an investment destination.
Luxury homes skyrocketed
Travel restrictions and constant lockdowns globally caused many high net worth individuals to move to Dubai to take advantage of the city’s infrastructure, business environment, amenities, and ease of life. As a result, luxury property boomed in 2021, with investors buying a second home in Dubai or moving their base completely. These investors focused on real estate assets in the Palm Jumeirah and Emirates Hills and are now even looking at areas like Business Bay and Jumeirah Village. This was evident mainly in the luxury villa segment, where prices rose by 16.5% year over year with a record of over 54 villas over $10 million each being sold by September 2021.
Modern Community Living
With the omicron variant now looming, many organizations will stick to a hybrid working model. Consequently, buyers will still require space, facilities and amenities to entertain, raise a family and work from home. Developments that provide community-like amenities without sacrificing connectivity will benefit. ZāZEN One in JVT is a great example of this. Located just off the Al Khail road highway, it is 10 mins from a major hospital, has 2 international schools, a new mall within the community, and a host of amenities within the development itself.
Environmental responsibility
As the UAE announced it will be hosting the UN’s climate change summit, COP28, in 2023, governments, corporations and individuals alike are becoming increasingly more aware of their responsibility towards a sustainable future. With buildings in urban cities contributing almost 40% of worldwide carbon emissions, it is now a responsibility for all property developers to put sustainable solutions at the heart of the development process, and for governments to put in place legislation and incentives to push sustainable development opportunities, in line with UAE’s commitment to achieving net-zero by 2050.
What next?
All of these trends provide guidance on where 2022 will focus in the real estate market. Community-based sustainable developments will take centre stage over the next five years, as the UAE and the world align with global sustainability targets. The real estate sector holds many of the solutions to alleviate climate concerns, such as targets for zero net carbon output, energy efficiency and adoption of renewables. The opportunity for the real estate sector isn’t only in physical buildings. It is also in health and the wellbeing of tenants, social sustainability, inclusion and diversity, accessibility and electric vehicle take-up. The developments that adopt this the quickest and provide that to their residents/tenants at the most affordable price will win.
According to a 2021 report, over 50,000 units were handed over in the past year with over AED 144 billion in total sales. Villas and townhouses saw the biggest increase in property value and demand but compared to 2020, there has also been a significant increase in apartment sales as seen below. 2022 is expected to continue this trend. I believe that the real estate market is now maturing in Dubai specifically. Better regulation, support for buyers, and low mortgage rates shift the needle to an end-user focused market.
With the supply of ready projects depleting, especially villas and townhouses, we have already seen a slew of new off-plan launches in Q4 2021. The major government-backed and private developers have planned multiple townhouse projects and villa communities, due for handover in 2024. This will most likely put downward pressure on villa and townhouse market prices over time. Apartment developers with ready inventory and a differentiated community-centric or sustainable offering will benefit going into 2022.
Over the long term, with a focus by the UAE government to develop the manufacturing and industrial sector, there will be a requirement for highly skilled middle-class workers. This influx will mean more jobs, more spending and a constant need for housing to accommodate the increase in population. With a forward-thinking government, world-class infrastructure, and multi-cultural business environment, Dubai’s real estate sector is primed to grow steadily and attract more buyers, locally and globally.
About ZāZEN Properties:
Launched in 2018, ZāZEN Properties is building unique residential developments in established communities of Dubai, catering to the mid-market segment consumer and providing a ‘community within a building.’
Its projects are built with sustainability in mind, with access to ample lush, open spaces and solar power, reducing the building’s energy consumption. ZāZEN Properties’ flagship development, ZāZEN One, located in the vibrant JVT community, is the perfect option for families looking to find a home that caters to all aspects of modern family life. Set to finish construction in December 2021 and handover at the end of January 2022, the development consists of 86 residences offering one, two, and three-bedroom duplex apartments ranging from 881 to 2803 sq ft, ZāZEN One also accommodates a unique option of a two-bedroom apartment with a maid’s room, something is rarely seen in the market before.
Construction is over 85% complete and units at ZāZEN One and are now for sale exclusively through their sales partner, JLL MENA. Customers are invited to visit the ZāZEN One show apartment in JVT and can book their visit by contacting +971 50 170 9376 or visiting www.zazen.ae.