UAE property prices set to rise in 2022 amid government initiatives, experts say

UAE property prices are set to continue rising in 2022, driven by supportive economic reforms and an accelerated vaccination programme that has helped to hasten a rebound from the coronavirus-induced slowdown last year, according to experts.

“The UAE property market will perform in a healthy way,” Haider Tuaima, head of real estate research at ValuStrat consultancy, told The National.

“We have developers offering attractive payment plans and mortgage interest rates are low. We will see more international investors coming in to buy the property next year.”

The UAE property market, which softened due to a three-year oil price slump that began in 2014 over oversupply concerns and the ensuing pandemic, has turned a page and is recovering as people move to larger homes with outdoor amenities amid a surge in remote working and online learning.

In addition, economic support measures and government initiatives – such as residency permits for those who have retired and remote workers in addition to the expansion of the 10-year golden visa programme – have also helped to improve market sentiment.

The price increase "is sustainable but it will only be toned down by the fact we have a lot of supply coming in, particularly in the apartment submarket”, Mr Tuaima said.

Developers are expected to deliver 50,000 to 60,000 units next year amid higher demand for residential property, he said.

Majid Al Futtaim Communities chief executive Hawazen Esber expects the property market to continue to rebound next year as the government takes effective measures to contain the pandemic.

He said Dubai had succeeded in positioning itself as a safe global city due to its measures to contain the pandemic, its healthcare system and Covid-19 testing requirements.

“People feel safe and there are no lockdowns. Retail and other sectors are thriving,” he said.

The UAE, the Arab world’s second-largest economy, has been recording less than 100 new coronavirus cases every day as the government steps up vaccination programmes to inoculate its population.

It has also administered both doses of the coronavirus vaccine to more than 90 per cent of its population, according to the National Emergency Crisis and Disaster Management Authority.

Residential property prices in Dubai jumped 21 per cent in the first ten months of the year to Dh1,235 per square foot ($336.28) in October, from Dh1,021 per square foot in January, according to a recent Knight Frank study.

Ultra-high-net-worth individuals, among others, are buying property in a big way to boost the market. In Abu Dhabi, prices rose 2.2 per cent in the year to August, according to a separate report by CBRE.

Mr Esber said investors are looking to invest on a long-term basis as Dubai’s global appeal grows.

Incentives offered by various developers are also drawing investors to the UAE. Photo: HMS Homes

“We are seeing a lot of international demand from territories and countries, which were more of short-term investors [earlier]. But we are seeing these type of investors coming in with a much longer-term view of having a second or third home in Dubai.”

Apart from government measures, incentives offered by various developers are also attracting investors to the UAE.

Top developers such as Damac and Emaar have unveiled attractive packages that include Dubai Land Department registration fee waivers and flexible payment plans to sell their projects.

Dubai-listed Deyaar is offering incentives at its Noor District project in the Midtown development. The offers includes the cancellation of service charges for two years and a 50 per cent waiver on DLD registration fees.

The company also introduced a five-year instalment payment plan to win over customers.

“With 2022 set to be competitive as both new unit completions and off-plan sales launches rise, we expect developers to continue to explore incentives to attract buyers,” said Chris Hobden, head of strategic consultancy at Chestertons Mena.

International interest in property purchases will “remain strong” over 2022, he said.

Off-plan properties are expected to account for a greater share of total sales next year, with developers across Dubai and Abu Dhabi reporting a rise in transactions over the second half of 2021, Mr Hobden said.

“While we expect demand to continue to be broad-based over 2022, prime water-front locations will likely draw particular interest from both end-user buyers and tenants, driven partly by ongoing work-from-home practices and [the] take-up of the UAE’s remote-working visa,” he said.

Expo 2020 Dubai, which began on October 1 and continues through to March 2022, is also boosting demand, according to Cyril Lincoln, executive vice president and global head of real estate finance and advisory, investment and agency services at Mashreq Bank.

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Dubai property rents: where they have risen and fallen in the third quarter of 2021

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The world's trade fair will help to propel the property market further, with the possibility that Expo visitors could become long-term residents and investors in the property sector.

Expo 2020 recorded more than 6.3 million visits in the period up to December 13.

Last month, Dubai registered 7,000 property sales deals worth Dh17.96 billion, making it the best November in terms of total sales in eight years, according to listings portal Property Finder.

Abu Dhabi registered property transactions valued at Dh16.2bn during the third quarter of 2021, according to the Department of Municipalities and Transport.

The ‏emirate completed 3,932 property transactions, which included Dh11.6bn in mortgages and Dh4.6bn in cash sales. About 2,224 mortgage transactions and 1,708 sales transactions were concluded in the third quarter of this year, the DMT said.

Another factor supporting demand for residential property in the UAE is the country's popularity and appeal to "digital nomads", Mr Lincoln said.

“The fact that a person can work remotely while still living in Dubai is a huge pull for people. They see the tax benefits and lifestyle opportunities and are keen to call this city their home.”

Abu Dhabi’s biggest developer Aldar Properties unveiled a number of new projects this year as demand picked up. Last month, the company started the last phase of its Yas Acres development, Dahlias, consisting of 120 villas, duplexes and town houses that are available for purchase by all nationalities.

The project launch comes after the sell-out of another Aldar project named Magnolias on Yas Acres earlier this year. Aldar registered total sales of Dh1bn from the sale of 312 residential units at Magnolias.

The company also sold all 83 villas at its development on Saadiyat island named Saadiyat Reserve, The Dunes.

Aldar also unveiled the third phase of its Noya project on Yas Island in May, which was sold out in four hours.

“[The] UAE and Abu Dhabi have [shown] a great resilience, economically and the way they dealt with the health crisis," Jonathan Emery, chief executive of Aldar Development told The National in an interview earlier this year.

These measures have boosted investors' confidence and "one of the primary asset classes" they are choosing to invest in is property, he said.

In Abu Dhabi, villa prices rose 14 per cent annually in the third quarter of this year while apartments posted a modest increase of 1 per cent, according to a report from Asteco.

Asteco recorded the delivery of about 2,200 residential units in the third quarter, including three buildings on Reem Island (with about 850 units), in addition to a number of buildings and villas located across different areas of Abu Dhabi.

More than 4,600 residential units are due for delivery in the fourth quarter of this year.

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At a glance

Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.

Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year

Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month

Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30

Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse

Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth

Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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UAE property prices set to rise in 2022 amid government initiatives, experts say

International interest in the real estate market is expected to remain strong

Dubai property rents: where they have risen and fallen in the third quarter of 2021

Property of the week: Dh45m Palm Jumeirah villa with a style of its own

At a glance

The specs

The five pillars of Islam

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About Housecall

The bio