Dubai real estate market booms as the wealthy flock to UAE to escape lockdowns

MENA

Published: 2021-05-30 10:43

Last Updated: 2024-05-29 07:39


Source: The Pinnacle List
Source: The Pinnacle List

The real estate market in Dubai is emerging from a six-year crisis at the hands of wealthy international investors who fled the lockdown measures related to the coronavirus in their countries and bought property in the UAE. 

Luxury villas are among the most attractive units in the real estate market recently in Dubai, where European buyers are especially looking for residential units on the man-made island of Palm Jumeirah, as well as properties located on golf courses.

Zan Zuchinki, director in charge of the consulting company Property Monitor, told AFP that the real estate market in Dubai, which has witnessed a decline since 2014, fell into hibernation with the spread of the coronavirus last year and nationwide closures. 

But "immediately after that, after the closure period, we started to see an increase in the volume of transactions and it has not stopped since then," according to Zuchenky.

"We are now witnessing record gains on a monthly basis and on the basis of the volume of transactions," he said.

The Gulf emirate has become one of the most prominent global destinations that reopened to visitors in July last year, after it succeeded in combining an open-door policy with strict rules related to social distancing, before launching a vaccination program among the fastest in the world.

Despite the increase in cases of Coronavirus in 2021 with the influx of tourists to the emirate, life continued normally while the restrictions caused movement to stop in other cities.

"I think we see a lot of them here," Zuchinky said, referring to other temptations such as the decision to allow foreigners to fully own companies without the need for a local partner.

The influx of visitors has revived tourism that has long been a mainstay of Dubai's non-oil economy, helping to recover and return to pre-Covid-19 levels last April, according to IHS Markit, a consultancy group.

"Travel and tourism companies recorded the largest noticeable rebound in performance, amid growing hopes for an increase in tourism activity later this year, supported by the rapid distribution of the vaccine," said David Owen, an economist at the group.

- Opening doors -

After years of hibernation and declining real estate stocks, the recent increase in the sale and purchase of luxury properties exceeding 10 million dirhams ($ 2.7 million) has emerged, with 90 deals signed in April compared to around 350-400 year-on-year, according to the Property Monitor company.

A mansion on Palm Island was sold for 111.25 million dirhams, the highest price reached in years in the area.

The highest-priced property currently on the market is a modern Italian-inspired villa located at the end of the Palm surrounded by a private beach. Its price tag? 100 million dirhams.

After a downturn in the real estate market during the height of the epidemic, developers are hoping that a wealthy person will feel tempted to purchase the unit that includes a pool and cinema.

"I think people are starting to realize that Dubai is no longer just a construction site, maybe 10 years ago when we had the largest number of cranes in the world," said Matthew Pat, CEO of Blackbrick Real Estate.

"People are now looking at Dubai and saying, 'I will move my headquarters here. I can work from Dubai and at the same time run businesses in Europe, North America or Asia,'" he added.

"I think what Covid-19 did in the end is that it opened our doors to the rest of the world." 

But in a volatile market that made a lot of riches and then lost it, there is tension over the possibility of the recent sudden rallies continuing.

Real estate sales exceeding AED 10 million increased by 6.7 percent in April compared to the previous month, and 81 villas in The Palm were sold in April alone compared to 54 in the whole of 2020, according to Property Monitor.

Even with the notable gains, the sector is still far from its 2014 high, amid a steady decline in the apartment market.

However, financial services firm Morgan Stanley said in a recent report that it is unlikely that this rally will stop anytime soon.

"Strong demand and peak supply growth (...) could lead to a more resilient market over the next several years," the company said.

It credited "the wave of government reforms over the past 12 months, attractive mortgage rates, and the shift in demand patterns due to COVID-19."

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