Cavendish Maxwell, a leading property consultancy and chartered surveying firm in the Middle East, released its Q1 2020 UAE Property Market Report, containing key data and trends for Dubai, Abu Dhabi and the Northern Emirates. The report provides comprehensive insights on the health of the UAE’s property market, covering the residential, commercial, retail, hospitality and industrial sectors. The report was compiled by the firm’s in-house strategic consulting and research team in collaboration with its extensive client and partner portfolio, drawing on proprietary data from real estate intelligence platform, Property Monitor.
Commenting on the report, Aditi Gouri, associate partner, strategic consulting and research at Cavendish Maxwell, said:
“The first quarter of the year has been unexpected for all, quickly going from business-as-usual to social distancing measures and restrictions which have impacted economic activity. Fluctuating crude oil prices also added uncertainty to the mix in March but there have since been hopes of achieving stability. Naturally, business activity across sectors has been affected by these developments and real estate is not immune to the universal challenges. However, the proactive stimulus measures introduced by authorities, including improved loan-to-value ratios for first-time homebuyers, will help enhance our resilience and enable us to quickly recover from this situation.
In terms of new supply, which has largely governed prices over the past quarters, fresh project deliveries may be impacted as construction companies, contractors and suppliers scale back activities as a precautionary measure against the further spread of COVID-19. Any signs of a slowdown in supply would bode well for prices.”
Key market insights
The Q1 2020 UAE Property Market Report from Cavendish Maxwell revealed several key insights and trends during the first quarter of the year.
Median apartment prices in Dubai declined 12% over the 12-month period from Q1 2019 to Q1 2020 whilst villa/townhouse prices declined 4%, outperforming apartments. Median apartment rents declined 14% whilst villa/townhouse rents were lower by 10% over the 12-month period from Q1 2019 to Q1 2020.
Average sales prices declined in Abu Dhabi’s major residential zones by 13.2% for apartments from Q1 2019 to Q1 2020. Villa/townhouse prices registered a slightly lower decline of 9.5% over the same period. Rents in Abu Dhabi registered declines in Q1 2020 for both apartments and villas/townhouses, however, the latter sharply outperformed apartments. In the Northern Emirates, the market stabilised slightly but continued to register low rents and rates. In Sharjah, soft prices, new launches and increasingly affordable options helped to record a busy period of transactions.
The total transfers in Dubai in Q1 2020 were 8,700 for both villas/townhouses and apartments compared to 12,444 in Q4 2019. Whilst transactions have declined on a quarterly basis, the full impact will only be seen over the next few weeks or months once normal activity resumes.
Over 6,200 apartments and over 800 villas/townhouses were handed over in Dubai during Q1 2020. In Abu Dhabi, apartments will continue to dominate upcoming supply in Q2 2020 making up over 80% of deliveries. Delivery of new units is expected to be impacted as many construction companies, contractors and suppliers temporarily suspended activities from March as a precautionary measure against the further spread of COVID-19.
With the temporary closure of entertainment centres, cinemas, indoor parks and food courts, malls can now expect revenue to trickle in from groceries, pharmacies, food delivery and online sales from certain stores. Retail giants have acknowledged these challenges, with several players offering waivers in some form to tenants.
The surge in demand for e-commerce, coupled with a potentially permanent change in shopping behaviour post the COVID-19 situation to favour online retail, will likely spur demand for warehouses, fulfilment centres and other logistics facilities. In Q1, warehouse enquiries at freezones comprised 25% of the pie versus 0% in the previous quarter whilst logistics and distribution enquiries climbed to take a 29% share versus 17% earlier.
As the health situation intensified and led to the cancellation of events and travel restrictions, hotels across all the emirates saw declines in occupancy, average daily rate (ADR) and revenue per available room (RevPAR) in Q1 2020. Whilst many hotels are in various stages of construction and scheduled for completion this year, the actual materialisation rate will likely be much lower than in previous years. With new dates proposed for the Expo 2020 with a possible starting delay of up to a year, many hotel completions may move to 2021.