What was the general market movement in Dubai in the first quarter?
Average apartment and villa rents in Dubai rose more than 40 per cent annually in some areas during the first three months of 2022.
Property consultancy Asteco said rental rates across all major asset classes are expected to increase further for good quality properties, albeit at a slower rate.
It said apartment rates were up 4 per cent on average compared to the fourth quarter of 2021, while villa rents rose 5 per cent on average during the quarter.
“Villas continued to be the predominant focus of demand and the limited number of new handovers translated into higher rental and occupancy rates,” Asteco said in its report.
“Annual rental growth in the villa market was rather significant at 25 per cent, while average apartment rental rates rose by 14 per cent.”
The shift to remote working during the coronavirus pandemic has led to tenants seeking more space, which has translated into demand for the villa communities in the outer suburbs. This has resulted in rents in areas such as Dubai Hills and Arabian Ranches rising 48 per cent and 47 per cent respectively year-on-year, Asteco said.
Other consultancies also reported substantial average rental rises. CBRE reported a 15.1 per cent rise for apartments and 23.5 per cent for villas year-on-year.
Similarly, Core reported a citywide villa rental average up by 23 per cent and apartments by 10 per cent year-on-year.
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“While improving at record pace, these rents are still below 2014 peak values, with villas lagging by 16 per cent and apartments by minus 33 per cent,” it said.
“However, we expect at the current pace, citywide villa market rents to reach the 2014 mark by end of this year and apartment rents following through.”
It added that many tenants are trying to find support from the Rera rental index to avoid sharp rises that landlords are asking for at renewal time.
But new leases are driven by market conditions with many landlords, particularly of units in sought-after buildings and districts, achieving asking prices, it said.
What about supply of new units?
A total of 6,250 apartment units were handed over in the first quarter, compared to fewer than 4,000 in the previous quarter, Asteco said. However, only 250 villas were handed over in the three months to the end of March.
“New supply, current and future, is scattered throughout Dubai with deliveries in established communities, such as Dubai Marina and Business Bay, as well as in upcoming developments including Port De La Mer, MBR City, Dubai Hills Estate, Damac Hills 1 and 2, etc,” it said.
Asteco added that new supply for 2022 is likely to fall short of earlier estimates. Delivery is now expected to reach 29,000 apartments and 3,250 villas by year's end, although a number of projects are likely to be delayed into 2023.
Core put the number of units delivered in the first quarter at 6,700 in total and expects a further 31,000 over the course of the year.
Major deliveries included Lawnz Residence in International City, Victoria Cluster and Centaury in Akoya Oxygen, Dubailand, O2 Tower in JVC, Sobha Creek Vistas, and a number of projects in MBR city.
How did Dubai's sales prices perform?
As with rents, prices have also been on the rise. The UAE property market overall has been rebounding on the back of government initiatives, such as residency permits for retirees and remote workers, as well as the expansion of the 10-year golden visa programme and the economic boost from Expo 2020 Dubai.
The market has also benefited from the country's widespread coronavirus vaccination programme, which has kept cases relatively low.
“Economic growth, positive market sentiment and the influx of new capital resulted in a surge in transaction values and volumes,” said Asteco.
“As such, sales prices recorded a significant spike, particularly in regards to villas, with average quarterly and annual increases of 5 per cent and 40 per cent. The strong demand in villas has also impacted apartment sales prices, which grew by 5 per cent compared to Q4 2021 and 22 per cent over the year.”