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Dubai Property: A solid 2021

Shady Elborno - Head of Macro Strategy
Published Date: 21 January 2022

 

The Dubai property market performed well in 2021, with apartment and villa sales prices showing their first yearly increase since 2014. Commercial real estate also showed signs of recovery in H2 2021. The Omicron wave arrived at the tail end of 2021, driving a return to working and schooling from home for some, trends that have driven a migration for larger spaced residential units, through H2 2020 into much of 2021. Are those trends likely to continue driving the market going forward? So far, the data shows that prices and rents for smaller sized residential units is beginning to rise and the pace of price increases for larger units at the end of the year is moderating. This is a sign the market is normalizing with uptake at the low end of the offering spectrum driven by factors such price differentials to those larger units.

Overall, we see the improvement in sales and rents of both residential apartments and villas as a sign of stabilisation after a multiyear decline. The commercial property sector also started reflecting improvement in the H2 2021, and while omicron might dampen some of that recovery, the medium- and long-term outlooks strongly point to a return to office agenda, as businesses more comfortably adapt to the dynamics of the virus. Higher interests may pose some challenges, however we are mindful they are rising from a low base, so expect the impact on mortgage demand to be moderate at least into the 2022 rate hike cycle. An unexpected adverse evolution of the virus, and any related restrictions are headwinds to the market outlook.

Data by the Dubai Land Department showed a robust rise across almost all metrics of transactional data it collated for the emirate last year. For 2021 Dubai recorded 84K transactions (up 65% y/y) with a value of AED300bn (up 71%y/y) in 2021. Foreign investors (by nationality) represented 73% of the total investor base and they executed transactions worth almost AED 99bn, close to 33% of the total transaction base. This reflects strong interest in Dubai, likely given polices that kept the emirate safe and open during the pandemic. The total number of investors in the market was in 2021 sharply higher at 52K investors (+66% y/y) executing 72K new investments in 2021 (+74% y/y), and at AED 148bn represented an almost  (+100%y/y) increase in the value of investments compared to 2020. The data combined with the pricing metrics we have confirm that both prices and transactions across most market segments were up in 2021.

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