Demand for prime residential property in a number of flagship communities in Dubai rebounded in the second half of last year, recording higher prices and transaction levels, according to Knight Frank.
Transaction volumes for prime properties increased by 7.9 per cent in 2020, compared to an overall 16.4 per cent market decline, the company's UAE Market Review and Forecast said.
"On the prime side of things, it's been a relatively good year. In the vast majority of markets, we've actually seen greater volumes in terms of transaction numbers in 2020 than we've seen in a few years," Taimur Khan, associate director at Knight Frank Middle East told The National.
Although prime residential values decreased by 4.2 per cent in 2020, in the second half of the year apartment and villa prices on Palm Jumeirah increased by 5.1 per cent and 9.4 per cent, respectively. Prices for villas in the Mohammed Bin Rashid City District One Community were 3.5 per cent higher and other prime markets such as Downtown Dubai and Emirates Hills also showed signs of improvement, the report showed.
The reasons for recovery are area-specific, but a common theme is a demand for mature communities.
"If you look at what's happening on the Palm, a lot of it is fairly developed out now. You can't really get the Dubai continuous additional development," Mr Khan says.
There had also been a readjustment in prices that meant even prior to the pandemic, "we were seeing a bottom for villas on the Palm". Improvements to roads and the addition of amenities such as the malls and other leisure attractions have helped drive demand.
Similarly, new community facilities at District One, where Meydan Mall is moving closer to completion, is also making the community attractive to prospective buyers, Mr Khan said.
"District One has done well because it's a really good product in a really good location - the ABCs of property," Mr Khan said. "You've got a villa community within 10 minutes of DIFC and Downtown, and that makes it very, very attractive. Historically, villa communities have been towards the Marina side [of the city] or Arabian Ranches."
Downtown Dubai is another area where construction is ongoing, but the community is maturing. "In Downtown, there are a few plots left, but in the large, it's getting there," he said.
Mohammed Bin Rashid City was the prime residential community with the highest amount of sales in 2020, with properties worth more than Dh6.4bn changing hands in 2020, according to a Luxhabitat Sotheby's report last month. Downtown Dubai and Palm Jumeirah saw sales of about Dh5.2bn and Dh3.5bn, respectively.
Dubai government measures to achieve a better balance between demand and supply appear to be paying off, with the number of new launches in 2020 at their lowest level for eight years, Knight Frank's report said. The amount of stock due to be delivered over the next 18 months will continue to keep the market attractive to buyers until a bottoming-out occurs in mid-2022.
In Abu Dhabi, the number of new launches were at their lowest since 2004, but are expected to increase this year.
"Given the relatively restrained levels of completions over recent years, we expect this not to have a drastic impact on the market," the report added.
The UAE's commercial market is set to undergo a period of major transformation. Globally, the pandemic will alter work patterns, but the office will "remain central to our working lives", used as a space for staff to socialise, collaborate and for education as opposed to just being a work setting.
In the UAE, market dynamics mean tenants coming to the end of leases "can effectively upgrade for little to no cost" to more modern spaces.
A trend towards consolidation was already underway, but this will accelerate as companies with onshore and offshore locations are likely to group in one place following recent commercial companies law changes.
"The structural change in the market is a very good thing in my opinion because it allows the country to attract more occupiers in the market, but it will cause a bit of pain for landlords" in the short term, Mr Khan said.
Ongoing travel restrictions also mean the UAE has yet to fully benefit from recent reforms aimed at attracting more investment, but there is anecdotal evidence that attempts to attract high net-worth individuals and investors through the easing of visa rules has brought some success.
"High net-worth individuals who [thought] that Dubai was a good place to set up for a while and work from here ... we know of a few cases where they've actually moved some of their business [to Dubai]," Mr Khan said.