Despite the challenges raised by the Covid-19 pandemic, real estate markets in the UAE have shown a considerable degree of resilience this year, according to real estate industry expert CBRE.
Looking ahead, the IMF and the UAE Central Bank forecast that the UAE’s GDP is expected to grow in 2021 by 1.6% and 2.4% respectively.
Whilst these growth forecasts have a considerable range, continuing improvement in activity in the non-oil sector, the recent uplift in oil output production cuts, which will aid the oil sector, both backed by stronger global growth, means that it will likely see the realised growth rate sit towards the higher end of the range, stated CBRE in its UAE Market Review Q2 2021.
On the residential market, CBRE said Abu Dhabi's residential prices increased by 2.4% in the year to June 2021. Over this period, average apartment prices increased by 1.5% to reach AED 10,034 per square metre and average villa prices increased by 6.3% to reach AED8,670 per sq m.
Whilst sales prices have seen growth, rental rates in Abu Dhabi remain under pressure, with average rental rates decreasing by 5.3% in the 12 months to June 2021.
In Dubai, transaction volumes in the first half of 2021 were at the highest level since 2013 and increased by 69.2% and 46.4% compared to the same period in 2020 and 2019 respectively.
Secondary market transaction volumes year-on-year in the year-to-date to June 2021 increased by 148.4%, whereas off-plan transaction volumes have seen a more muted increase of 13.4% over this period, according to CBRE.
Given the strength of demand underpinning the market, we have seen price performance improve considerably. In June 2021, average residential prices in Dubai were at the same level compared to a year earlier.
Although it is important to remember that this reference period was effectively the height of the pandemic for Dubai. Over the same period, apartment prices were 1.8% lower and villa prices increased by 12.7%.
In the year to June 2021, average rental rates in Dubai fell by 5.9%, where softening apartment rental rates unpinned the decline, with an 8.1% decline on average, it added.
On the offices sector, the expert said Prime and Grade A rents have increased by 7.5% and 2.5% respectively in the year to June 2021. Whereas Grade B rents fell by 9.7% over the same period.
Whilst there is a clear divergence in market performance, overall, the market still remains tenant favourable, where incentives, such as rent-free periods, are not uncommon, it added.
Dubai’s office market has continued to see rental rates soften, with average Prime, Grade A, Grade B and Grade C rents falling by 4.5%, 6.5%, 6.9% and 7.0% in the year to June 2021, respectively.
With new institutional market entrants remaining limited in number, the vast majority of activity continues to stem from existing occupiers. A portion of existing occupiers have taken advantage of softer market conditions to upgrade the quality of their space, particularly as long-awaited, efficient floor plate projects which have been delivered are now operational.
The delivery of new supply in Dubai is expected to be limited, with 1.13m square feet of additional supply forecast in 2021. With the majority of this upcoming supply being in non-core locations, going forward, we may begin to see moderation in the rate of declines seen in Prime and Grade A rental rates and an uplift in the average occupancy rate.-TradeArabia News Service
&uuid=(email))