CBRE Group, a real estate investment firm specializing in real estate in Dubai rose 4.4 percent in the 12 months ending in August, marking the highest annual increase since February 2015.
However, a continued decline in rents points to ongoing weakness in the sector, which has been struggling for some time. CBRE said rents in Dubai continued their downward trend, falling by an average of 2.7 percent in the year ending in August.
Reuters reported in March that the luxury segment of Dubai’s real estate market had seen a rebound after a sharp decline caused by the COVID-19 pandemic, but the road to recovery for the sector remains long.
Even before the pandemic, the long-term economic trend in the UAE had been sluggish since the collapse of oil prices in 2014 and 2015. The supply of new homes and apartments has outstripped demand for years in a market where most residents are expatriates, many of whom left during the pandemic.
CBRE data showed that market trends continue to favor villas over apartments, and prices remain below their historical highs. While apartment prices rose 2.5 percent and villa prices increased 17.9 percent in the 12 months through August, they were still 30.4 percent and 20.5 percent lower, respectively, than their 2014 peaks.
Apartment rents fell 5.2 percent year-over-year in August, while average villa rents rose 15.5 percent—the highest growth rate recorded for the sector.
The office market saw an increase in occupancy, rising to 28.8 percent in the third quarter of this year from 77.1 percent in the previous quarter. At the same time, average rents in the premium and first- through third-grade categories fell between 4.1 percent and 6.5 percent year-over-year in the third quarter.
CBRE said that pressure on prices came from new entrants, such as international and local technology companies, fintech firms, and Chinese companies. These companies tend to seek prime and Class 1 office space.