Apartments in Dubai are the preference of buyers once again in a reversal of the pivot to villa and town house living during the early part of the coronavirus pandemic.
Villas became more attractive during the onset of Covid-19 as residents sought more space and many workers shifted to home working.
However, with many of the restrictions now lifted, the market has shifted back with apartments becoming more popular, according to brokers.
The third quarter of this year saw 73 per cent of Dubai sales transactions involve apartments, Dubai Land Department data showed. This compares to 67 per cent in the same period last year.
Total sales transactions in Dubai were up 61 per cent year on year in the third quarter, while there was a 76 per cent increase in apartment transactions year on year. Villa transactions were down 5 per cent during the same period.
This shift can be attributed to rising prices in the villa market, and multiple interest rate rises this year, brokers said.
Brokerage Allsopp&Allsopp said it has started to see a shift back to the prime popular areas such as Dubai Marina, Downtown Dubai and Business Bay. It saw a surge in popularity in JVC due to the amount of amenities and entertainment now available in the area, coupled with its affordability.
“On the buying side, there was the change during Covid of lowering the deposit amount needed to purchase a property, which increased peoples' affordability, as well a record low interest rates which made monthly mortgage payments very attractive,” said Lewis Allsopp, chief executive at Allsopp&Allsopp.
“Now I believe we are seeing the effects of increased interest rates (impacting affordability), buyers reaching a ceiling on what they're prepared to pay for a villa or town house and also with apartments not seeing the same rate of increase over the last couple of years, they're really attractively placed in the market at the moment.”
Dubai's property market rebound has picked up pace this year as the emirate's economy continues to make a strong recovery from pandemic-driven headwinds.
The emirate's economy grew by 6.2 per cent in 2021, according to preliminary data from the Dubai Statistics Centre. In the first three months of this year, Dubai's gross domestic product expanded 5.9 per cent, according to government data.
Another reason for the decline in villa activity and rise in apartment buying is a lack of supply in the villa segment.
“One of the main reasons that we are seeing an increase in demand for apartments is because, quite simply, there are no villas available,” said Mark Castley, chief operating officer at LuxuryProperty.com.
“The villa market has boomed in the wake of the pandemic to the point where supply is extremely limited.
“From a pricing perspective, villas were a very attractive option back in 2020, but in the current market many buyers at around the Dh5 million point are getting priced out of the market. For the down payment that's required at that level, it makes a bit more sense to aim for a good apartment in the Dh3m to Dh4m range. A combination of affordability and availability have helped to put apartments back on the radar for most buyers.”
He added that the majority of projects being handed over recently are apartments. These include developments such as Act One/Act Two, Burj Royale and Forte in Downtown. Madinat Jumeirah Living has started to hand over, as well as apartment projects on Palm Jumeirah such as One at Palm, Atlantis the Royal.
He said a “change in the city's atmosphere” has also affected buying trends.
“In the immediate aftermath of the pandemic, larger and more secluded homes were the order of the day. With so many restrictions being eased in 2022, there isn't that same desire for isolation among buyers.”
Dubai apartment prices, September 2022
The attraction of apartments was backed up by Betterhomes' group managing director Richard Waind.
He said that for investors, the value offered by apartments, where prices are still behind the peak of 2014, is “compelling”.
“The option to both short or long let them and the lower price entry point make apartments particularly attractive to investors,” he said.
“In addition, end users who may now find villas unaffordable are also now returning to apartments.”
Prime residential values in Dubai, which encompass The Palm Jumeirah, Emirates Hills and Jumeirah Bay, have risen significantly during the past year.
They rose by 89 per cent in the past 12 months, according to a report by property consultancy Knight Frank.
“Prime residential values in Dubai continue to strengthen, growing by 29 per cent in Q3 [third quarter] alone, fuelled by a persistent deluge of UHNWI [ultra high net worth individuals] who are zeroing in on Dubai’s premier districts in search of second homes,” said Faisal Durrani, partner and head of Middle East research at Knight Frank.
The market boom is expected to continue across all price segments, with a further boost set to come from the hosting of the football World Cup in Qatar next month.
Average prices for residential properties in Dubai rose by 8.9 per cent in 12 months to the end of September, with average apartment prices rising by 8 per cent and villas recording a more than 14 per cent jump, according to CBRE.