UAE Price Trends – A Look Back at 2018 and Ahead — by Lukman Hajje

UAE property prices continued to decline in 2018. This ongoing market correction is creating challenges for the industry and UAE property owners alike but continues to be a big win for consumers, who are now more than ever, spoilt for choice.

UAE Price Trends - A Look Back at 2018 and Ahead — by Lukman Hajje

Those of us who’ve been here a while are so used to the good life that we’ve grown a bit soft. During the tough times when we fret about falling asset values, negative equity and reduced yields, our moans often took place in exquisite beachfront restaurants over perfectly seared scallops.

Property Prices Below Construction Costs

The head of one of Dubai’s leading brokerages recently told me that property prices are now below construction costs, so regardless of what you think will happen in 2019, buying in this market represents fabulous intrinsic value. A nice sales pitch perhaps, but with rents at 2010 levels with seemingly endless options for both buyers and renters, there’s a big silver lining to this ongoing correction.

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Vacant on Transfer (VOT) becomes the new market buzzword

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An Inconvenient Truth

Over the past year, we’ve seen developers engaging in more aggressive marketing strategies and agents competing in what has become an increasingly crowded market place with several new project launches and handovers. Pay 10% and move in! 2 year, 5 year and 10-year post-handover payment plans! Pay 1% per month! Guaranteed finance (insert shock face emoji), plus DLD and maintenance fee waivers to mention a few.

Critics will tell you that there’s no such thing as a free lunch and the more freebies on offer, the less likely the underlying property purchase price will stack up to an independent bank approved valuation. While advocates claim that a post-handover payment plan is effectively a developer-funded interest-free mortgage, so the extra you pay on the purchase price, you’ll save in mortgage interest.

Both are valid arguments but whichever side of the fence you sit, high agent commissions, overly generous payment plans and endless fringe benefits are clear signs of an oversupplied market, which is likely to see further corrections.

Dubai’s winning of the 2020 Expo has massively boosted Dubai’s international profile. The economy has also benefited from hundreds of new residential and commercial launches as well as infrastructure work and cultural projects. But it’s been a double-edged sword. Given the current challenges of regional and global economies as a whole, a strong USD and historically low oil prices, it’s not surprising that demand has lagged behind supply. At least in the interim – but eventually it will catch up.

UAE property prices have been falling for four and half years, but I continue to be bullish about the country’s broad appeal to a wide demographic and longer term viability.

Apartments for Rent

Here in Dubai, we are witnessing the creation of one of the world’s greatest cities. And when making an omelette you have to break a few eggs.

This is arguably the best time ever to be a tenant in the UAE. Dubai apartments advertised rental asking prices have dropped almost 30% in the last 2 years, with more than half that in the last 12 months alone.

UAE Price Trends - A Look Back at 2018 and Ahead — by Lukman Hajje - Apartments for Rent

Abu Dhabi apartment rents have fallen even further, dropping almost 37% in the last 2 years, with over 20% in the last 12 months. Drops in asking rental prices in the Northern Emirates have not been as dramatic but all Emirates, bar RAK, saw double-digit apartment rent declines in 2018.

The median asking price for an apartment for rent in Dubai is now just AED 80k per annum, AED 71k in Abu Dhabi and AED 38k in RAK and Sharjah. In Ajman, it’s just AED 26k – down 27% from 2 years ago.

Abu Dhabi Apartments for Rent

Apartments for Sale

Apartment sale prices held firmer than rents. An annual drop of 4.2% in Dubai and 5.5% in Abu Dhabi is modest by recent standards. There were bigger declines in the Northern Emirates with Ajman seeing the biggest drop in 2018 at 10.5%. The median price per sqft for an Ajman apartment is now just AED 280, 77% lower than Dubai which means for the cost of renting the typical Dubai apartment for three years, you could purchase a large one bedroom apartment in Ajman, in cash.

Food for thought.

UAE Price Trends - A Look Back at 2018 and Ahead — by Lukman Hajje- Apartments for Sale

Villas for Rent

More and more families are taking advantage of the current market situation to get out of their apartment and upgrade to a villa with more space and a garden. It’s no longer a case of where one can find a suitable property, but deciding which to choose. Villa rents in Dubai dropped -11.3% over the past 12 months and -22.2% over the past 2 years. Abu Dhabi villa prices appear to be flattening, dropping just -1.8% over the past 6 months. Villas in Abu Dhabi are now, once again, slightly more expensive than Dubai. Villa rent declines in Sharjah have been the largest in the country over the past 2 years, with falls of almost -23%. The average villa in RAK has now fallen below AED 100k, while in Ajman they’ve actually started to creep up in the past 6 months. At just AED 79k per year, Ajman is the most affordable place to rent a villa in the UAE.

UAE Price Trends - A Look Back at 2018 and Ahead — by Lukman Hajje - Villas for Rent

*Charts show percentage change of the average price in the past 6 months (Jul-Dec’18), vs 6 months before (Jan-Jun18), vs 12 months before (Jul-Dec’17), vs 18 months before (Jan-Jun’17) vs 24 months before (Jul-Dec’16).
*Rental price is based on the annual median asking price displayed on Property Finder.
*Sales price is based on the median asking price per sqft displayed on Property Finder.

Villas for Sale

In 2018, villa sale price declines have been in the high single-digit percentages in Dubai (-7.8%), Abu Dhabi (-9%) and Ajman (-7.7%). While in Sharjah, they fell -19.5%, but were more stable towards the end of the year, falling just -1.4% in H2 2018. RAK villa prices were the most stable in 2018 and seemingly turned the corner later in the year with an increase of 3.6% in H2. Dubai villas were the most expensive in the country at AED 896 per sqft. More than 2.5 times more expensive than villas in Ajman, which recorded a median advertising price of just AED 348 per sqft.

Dubai Villas for Sale

Transactions

UAE Price Trends - A Look Back at 2018 and Ahead — by Lukman Hajje - Total Sales Transactions 2017 vs 2018

Transaction volumes fell by -11% to 34,942 in 2018 across Dubai. Villa transactions declined by -26.1% to 4,285 and apartment transactions fell by -16.6% to 25,998.

UAE Price Trends - A Look Back at 2018 and Ahead — by Lukman Hajje - Total Sales Transactions 2017 vs 2018

Despite increasingly aggressive and seemingly generous incentives, off-plan transactions were down 30.2% in 2018. Off-plan transactions represented 53% of total transactions in Dubai in 2018.

UAE Price Trends - A Look Back at 2018 and Ahead — by Lukman Hajje - Total Apartment Sales Transactions 2017 vs 2018

*Based on data from the Dubai Land Department, these tables highlight the average transaction prices for popular communities in Dubai. These prices can be contrasted with the median asking price data reflected in the previous tables.

Mohammed Bin Rashid City saw the most transactions in 2018 with 3,342 in 2018; up +53% compared to 2017, ahead of Business Bay (2,945 transactions), International City (2,560 transactions), JVC (2,305 transactions) and Dubai Marina (2,040 transactions). International City saw a significant increase in transactions in 2018 (+78%) as did DAMAC Hills (+61.5%) and Akoya Oxygen (+273%).

Transactions in JVT more than halved down 53%. Downtown saw 927 fewer transactions in 2018 down 35%.

This article was originally published in Property Finder Trends Vol. 5.

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By Lukman Hajje

Chief Commercial Officer at Property Finder

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This Blog is made available for educational purposes only, in addition to providing you with general information and a general understanding of its content, including referenced laws and regulations, and not to provide specific legal advice. The Blog should not be used as a substitute for competent advice from a licensed professional.