The property market in Dubai is set to become more affordable in 2021.
Analysts forecast a further decline in prices as the emirate works through excess supply.
“Dubai does have oversupply in residential units … and that is likely to put further downward pressure on the market,” Dana Salbak, head of research for Mena at JLL, told reporters on Monday. “We are likely to see single digit declines [of 5 to 8 per cent] moving forward.”
The property market in the UAE slowed in the wake of a three-year oil price shake-up that began in 2014. Prices have since remained under pressure due to oversupply concerns.
The coronavirus-induced economic slowdown further pressured the market in 2020, slowing sales momentum. As a result, property prices were 8 per cent lower year-on-year in Dubai and 4 per cent lower in Abu Dhabi during the fourth quarter.
It will take some time before the market bottoms out, Ms Salbak said, despite investor demand picking up towards the end of last year. This is partly due to the fact that supply continues to build. JLL forecasts 53,000 homes are due for handover this year, a 9 per cent increase on the total stock of 595,000 at the end of last year.
Both the stock and the number of units due to be delivered in Abu Dhabi are lower, at 265,000 and 15,000, respectively.
This year's Dubai Expo event, as well as regulatory changes announced by the government, will also help to stimulate demand, Ms Salbak added.
“We have Expo towards the end of year, which ... if all things remain normal from a global perspective, from a travel and tourism perspective ... is likely to benefit the market and likely to benefit sentiment. Regulatory reforms [will] continue supporting the market.”
The UAE reformed its commercial companies' law last year and scrapped a requirement for onshore companies to have a majority Emirati shareholder.
The move is expected to increase foreign investment and drive property demand in the country. Other initiatives such as visas for expatriate retirees are also expected to stimulate interest in the market.
Some 11,065 property transactions with a value of Dh22.05 billion ($6bn) were completed in the final quarter of 2020, down 10.6 per cent and 8.4 per cent on the same quarter in 2019 but up 24.7 per cent and 21 per cent respectively on the previous quarter, Emirates NBD's head of macro strategy Shady El Borno said in a note on Monday, citing Dubai Land Department figures.
"It is too early to say whether the residential real estate market in Dubai has bottomed. While we do expect the economy to recover in 2021, it remains to be seen whether this will translate into private sector job growth and ultimately population growth. Moreover, the market will still need to absorb new supply of both apartments and villas," Mr El Borno said.
Despite a challenging 2020, secondary market transaction activity saw an increase of 7 per cent over 2019 volumes, according to a new report by consultancy Core.
"Significantly lower buying costs and a raft of government-led demand drivers are the biggest factors currently supporting transaction activity," Core said. "In fact, after the initial slump in April and May 2020 due to movement restrictions, December witnessed the highest monthly transaction volumes in two years."