The pandemic has changed preferences from living to shopping as people choose bigger and more open spaces to live in and increasingly adopt e-commerce as a preferred means to shop and dine.
Property prices continued to decline in Dubai and Abu Dhabi in the third quarter even as market activity and consumer confidence gained traction with the easing of pandemic curbs and hopes of a sooner than expected recovery, market analysts said.
“Slowly but surely, stability continues to be achieved in the UAE as market activity resumes and consumer confidence is restored,” analysts at Cavendish Maxwell said.
“The biggest indicator of this is the spike in property transaction levels in the third quarter versus the previous quarter, as investors and end-users act to secure quality spaces at attractive prices,” said Aditi Gouri, head of strategic consulting and research at Cavendish Maxwell wrote in ‘UAE Property Market Report’.
“Capital values remain under pressure in areas with excessive existing or upcoming supply while the more sought-after communities are experiencing stabilisation in prices, and even appreciation in certain cases,” said property consultancy in its report.
The report noted that the pandemic has changed preferences from living to shopping as people choose bigger and more open spaces to live in and increasingly adopt e-commerce as a preferred means to shop and dine.
“Property developers and operators across sectors must be aware of these changing preferences and will likely have to alter or repurpose upcoming project offerings.”
In the third quarter, average residential property prices in Dubai declined 11.7 per cent over the 12-month period from third quarter of 2019 and 4.6 per cent on a quarterly basis. Average apartment rents declined 15.9 per cent over the 12-month period from Q3 2019 to third quarter of 2020 and 5.9 per cent on a quarterly basis whilst villa/townhouse rents were lower by 8.9 per cent on a yearly basis and 2.0 per cent from the previous quarter.
In Abu Dhabi, average sales prices declined across major residential zones by 5.6 per cent for apartments and 5.3 per cent for villas/townhouses since first quarter of 2020, outperforming Dubai, said the Cavendish Maxwell report.
Rents in Abu Dhabi registered declines in the third quarter 2020 for both apartments and villas/townhouses. The average decline was 6.1 per cent for apartments from the first quarter of 2020 to the third quarter of 2020 compared to 6.2 per cent for villas/townhouses. During the third quarter of 2020, residential rents across the northern emirates continued the declining trend from previous quarters.
According to JLL’s recent market performance report, developers are expected to continue offering a range of incentives such as fee waivers, discounts, rent-to-own, as well as partnerships with banks to attract new investors and end-users looking to take advantage of the lower prices.
The JLL report argued that house prices in Dubai are expected to remain subdued this year, mainly due to huge supply, aggravated by low demand due to the pandemic. In Dubai, only a few projects were put on hold during the pandemic and approximately 16,400 units are planned for delivery in Dubai by the end of 2020. However, final numbers will depend on the actual materialisation rate achieved, Cavendish Maxwell said.
Scheduled upcoming supply in Abu Dhabi for 2020 is estimated to be over 6,100 apartments and 450 villas/townhouses in both, investment zones and Abu Dhabi City. However, actual materialisation may be lower due to project delays and staggered and phased delivery by developers, said the report.
The office market in Dubai is likely to remain under pressure in the near term as many companies are yet to resume operations at pre-pandemic levels. “In turn, landlords are offering concessions and incentives to new and existing tenants. Sellers and landlords are expected to realign asking prices towards the offer levels of purchasers and occupiers in the near term.”
Since June, consumer confidence has returned and been further strengthened with retailers and developers adhering to safety protocols to make shoppers feel more comfortable, Cavendish report said.
The Dubai hotel market saw declines in occupancy, average daily rates and revenue per available room. Over the past two quarters, commercial rents of Grade A fitted commercial assets in Abu Dhabi mainland were impacted to a greater degree than Grade B and Grade C offices.
Industrial rents across the UAE vary widely and range between Dh12 and Dh 35 per square foot.
“While most other segments of the economy are grappling with tepid activity in the wake of the pandemic, the e-commerce space continues to boom, with consumers fulfilling all their shopping needs from groceries to fitness equipment through online channels. The surge in demand, coupled with a potentially permanent change in shopping behaviour even post the Covid-19 situation in favour of online retail, will likely spur demand for warehouses, fulfillment centres and other logistics facilities, especially in the onshore market,” said the report.