2020 property prices and rentals

Residential property supply is set to hit an all-time high in Dubai in 2020, keeping prices and rentals under pressure this year as well and attracting more cost-conscious buyers due to higher affordability, say analysts.

Real estate research firms predict around 50,000 units will hit Dubai this year with most of it attributed to the spillover of expected handovers from last year. It is believed that the decline in prices and rentals will slow down this year as 2020 will be a pivotal year for Dubai's economy and the real estate market.

Property analysts believe that 2020 will be a key indicator to ascertain where the Dubai's property market stands now in terms of demand and supply balance and set the direction for the prices and rentals in coming years.

Aditi Hariharan, associate partner for strategic consulting and research at Cavendish Maxwell, said some areas in Dubai are beginning to exhibit growth, which is certainly a positive sign of things to come. "We do believe that the rate of decline will slow down across others, but overall we still expect supply to exert pressure on prices and rentals on the overall market in 2020."

She said prices last year declined 15 per cent in the apartment segment and nearly 18 per cent in the villas/townhouses segment versus 2018. Rents declined 13.4 per cent in the apartment segment and by 9 per cent in the villas/townhouses segment versus 2018.

"Rents typically fall at a slower rate than prices, which has a positive effect on yields for the market as a whole. Rents will continue to fall in many areas of Dubai in 2020, but again, this is not a trend we expect to see across all areas of Dubai."

According to real estate consultancy CORE, the average year-on-year of the sales price drop was over 8 per cent and the rental drop was over 9 per cent in 2019.

"We expect both rentals and sales prices to remain under downward pressure this year. However, in 2020, we expect the market to continue being occupier friendly, with underlying demand being met, evidenced by a steady increase in transaction volumes," said Prathyusha Gurrapu, head of research and advisory at CORE.

Within the first half of 2020, Hariharan expects over 50,000 units of residential supply to enter the market as developers hand over projects delayed in 2019, which could exert downward pressure on prices.

However, the materialization rate of handovers in the emirate is generally lower than forecast, around 60-70 per cent, which comes to around 30,000 to 35,000 units.

As a result of a decline in prices, Zhann Jochinke, chief operating officer of Property Monitor, said many buyers who were potentially on the fence regarding property purchase decisions have decided to enter the market, as reflected by the record transaction figures in 2019.

"Whilst this is a strong indicator of hitting a floor in terms of prices, other indicators such as high vacancy rates and the expected upcoming supply are yet to show signs that support stabilisation.

Looking ahead to 2020, the Expo is going to be a key indicator of where we stand in terms of demand and supply," he said.

Prathyusha Gurrapu says she remains cautiously optimistic on the city's real estate near to midterm outlook.

She said landlords are flexible in order to maintain occupancies, with leasing incentives expected to continue, including rent-free periods and longer contract terms, refurbishing units or contributing to utilities. "We are also witnessing a higher number of cheques increasingly becoming the norm, particularly in the lower to the mid-market segment where tenants are price sensitive and barriers to relocation are low."

Short-term rentals in Dubai is set to get a shot in the arm following the introduction of long-term visa by the UAE.

"With the launch of the five-year tourism visa for all nationalities, we expect a considerable rise in short -term rentals and the holiday homes market," says Prathyusha Gurrapu, head of research and advisory at CORE.

The UAE Cabinet has approved five-year tourist visa for all nationalities and set to be issued from first-quarter of 2020.