Persistent oversupply will weigh on price gains, Cushman & Wakefield Core says
Price gains in Dubai’s residential property could moderate this year amid continued oversupply after a surge in demand for larger homes helped end a six-year losing streak in 2021.
Residential prices rose 9.8% in 2021 on average, according to real estate consultancy Cushman & Wakefield Core. The increase was driven by single-family homes, known locally as villas, as people worked from home during the pandemic and sought out bigger houses.
Values for villas, which make up less than 20% of the city’s housing supply, surged 22% last year, Cushman & Wakefield Core said in a report on Thursday. That’s still about 16% lower than a 2014 high. Meanwhile, prices of apartments -- which make up the vast majority of housing supply in Dubai -- rose 7% in 2021, about 29% below a 2014 peak. Overall rents increased 6.7% from a year earlier.
Dubai’s nimble handling of the pandemic helped the city end a years-long property slump and pushed prices higher across most localities. The UAE had one of the world’s fastest vaccination rollouts and managed to keep cases in check for most of last year.
Still, oversupply has plagued the market for years, keeping price gains somewhat in check.
“We expect the price recovery to continue although at a slower pace as the market stabilizes and works through new supply, especially in less established areas,” said Prathyusha Gurrapu, head of research and advisory at Cushman & Wakefield Core. “We also need to see how the market will do post Expo 2020.”
Out of 37,000 homes completed in 2021, only 16% were villas, according to Cushman & Wakefield Core. In 2022, 36,000 homes will be completed, a figure that Cushman & Wakefield Core describes as a conservative estimate.
“With the phasing of many projects due to the pandemic over the last two years, we expect a higher number of handovers this year,” the consultancy said. “Further revisions are expected on supply forecasts as developers continue to calibrate to ever-changing market conditions.”