We have written more than once about real estate in the UAE, each time noting its attractiveness and prospects. 2020 will be a special year for the UAE economy, as this year the country will host the Dubai Expo 2020. The event will take place from October 2020 to April 2021. This exhibition, as well as the new fifty-year development plan of the Emirates, is sure to give a strong impetus to investment in the country.
According to information Property Monitor Only at the beginning of this year, developers are ready to offer the Dubai real estate market about 50,000 new residential properties, mostly apartments. However, based on data from previous years, we can predict the implementation of this plan by 60-70%.
This volume of housing will be in demand, given the interest in the country that the exhibition will awaken and the number of tenants potentially willing to work here. And there will probably be a sufficient number of them, given the number of expected guests, stated as 25 million people.
What scenarios will play out in the Dubai real estate market in 2020? We will talk about this further.
Changes for tenants.
Taking into account the above statistics on the delivery of new residential space, we should expect a decrease in rents in 2020. And taking into account the volume of construction, and even looking a year ahead, a decrease in rent is also predicted for 2021.
Also a pleasant circumstance for tenants will be the changed conditions of service. An increase in the volume of quality housing built to modern standards will require adjustments to the current market. Landlords will invest in their old properties so they can compete with new ones.
When we talk about modern standards, we mean the long-term government strategy Smart Dubai, one of the branches of which concerns the “digitalization” of construction and the transformation of Dubai into a “smart city” consisting of “smart houses”.
As we wrote earlier, Dubai has had very low mortgage interest rates for a long time. Therefore, expecting them to fall even further would be short-sighted. However, in addition to the loan rates themselves, there are other tools that banks can use in the fight for the client. And now other instruments will begin to change in the direction of weakening. These include down payment, age limit and the like.
The Dubai property market trend is tipping the scales from renting to buying. The dynamic real estate price index for 42 residential communities in the city indicates the increasing availability of properties for citizens. November last year now ranks as the best-performing sales month of the past decade, 55.4% above the monthly average.
At the same time, you should not think that the cost per square meter is simply falling in Dubai. The increase in affordability is associated with the pragmatism of developers, who have begun to more realistically assess the capabilities of their buyers and build housing with middle-class buyers in mind.
At the end of 2019, the average profitability of villas in Dubai was 4.7%, and apartments – 6%. At the same time, as we noted earlier, the average rental rate is gradually falling under the pressure of growing supply in the rental market and a gradual shift in the focus of customer interest towards purchasing. However, due to the rapid decline in the capital cost of housing, which amounted to 11.5% in 2019, net profitability is growing.
Where to buy?
At the moment, universal advice for a buyer of real estate in Dubai would be to look for construction near the windows of the property. The current trend of the local market is such that any promising project, once completed, will sharply increase the cost per square meter in the area.
To help you navigate the prices, here is the order of housing prices in Dubai:
Significant changes that have already begun to have a serious beneficial impact on the Dubai real estate market are the recent decision to issue golden visas and the establishment of a Real Estate Market Oversight Committee. This regulatory body is designed to maintain the balance of supply and demand and prevent competition between private companies and companies affiliated with the state.
This year will be a landmark year for the UAE and especially Dubai. And at the moment one can observe positive changes in the local real estate market, which inspire optimism among investors.