Standard & Poor's Ratings Services said that real estate prices in Dubai have clearly rebounded from the record low they reached at the end of 2020, but demand remains volatile, and the abundance of residential property supply will put pressure on prices in the long term, making the recovery fragile.
C.B.R.E. Group, a real estate investment firm, had said that average residential property prices in Dubai rose 4.4 percent over the 12 months through August, the highest annual increase since February 2015, but the continued decline in rents points to ongoing weakness in a sector that has been struggling for some time.
Standard & Poor’s said, “The recovery in residential property demand has greatly benefited the luxury real estate development sector, with increased sales and improved prices.”
It added that market data shows that residential apartments, which account for between 85 and 90 percent of the real estate market, saw price increases of about 6 percent in the second quarter. Villa prices also rose, while apartment rents continue to slow.
Reuters reported in March that Dubai’s luxury real estate sector had seen a boost following a sharp decline last year, but the road to recovery for the sector as a whole remains long.
Even before the pandemic, the long-term economic trend in the UAE had been sluggish since the collapse of oil prices in 2014–2015. The supply of new homes and apartments has outstripped demand for years in a market where most residents are expatriates, many of whom left the country during the pandemic.
Standard & Poor’s said real estate prices are at a low point in the cycle and predicted a recovery in 2021–2022, supported by increased demand as consumer sentiment improves, rising oil and gas, rising vaccination rates in Dubai, and the city’s hosting of the World Expo, which was delayed by a year due to the pandemic.
It added, “We believe that demand for residential real estate in the longer term will depend… on the success of recent government initiatives aimed at increasing the population through the issuance of new visas and the enactment of more liberal social laws.”