The second quarter of 2023 witnessed impressive trends in the real estate markets of Dubai and Abu Dhabi, showcasing remarkable resilience in the face of escalating interest rates and inflation. A comprehensive report by Asteco, the UAE’s leading full-service Real Estate company, sheds light on these encouraging developments.
According to the Asteco Q2 report, approximately 1,400 apartments were introduced to Abu Dhabi’s market during Q2 2023, with another 2,200 apartments and 850 villas slated for delivery by year’s end. While the new supply was allocated across established International Investment Zones, a significant portion was concentrated in the Al Reem Island and Saadiyat Island master plan communities.
The market also anticipates several upcoming projects, with official announcements expected later in 2023 and early 2024. Q2 2023 witnessed the launch of various new projects for sale, including Murjan Saadiyat, The Source on Saadiyat Island, and Jubail Island – Phase 3.
In the rental market, prime and high-quality residential developments experienced rental rate increases ranging from 2% to 5% over Q2 2023. Notably, prime villa communities, especially those on Saadiyat and Yas Islands, remained highly sought-after, witnessing rental hikes of up to 10% compared to the same period last year. Mid and low-end developments maintained relative stability with nominal rental rate changes, although lower-end options faced challenges from a growing supply and increased alternatives.
The demand for office space, particularly within the Grade A / B+ category, was robust, with both existing companies seeking expansion and new entrants expressing interest in the Abu Dhabi market.
Strong transactional volumes were recorded for both completed and off-plan developments during Q2, largely driven by end-user demand. Completed apartment developments maintained stable sales prices over the quarter, reflecting a modest average 1% annual increase.
While the average villa sales prices in Abu Dhabi witnessed a nearly 2% increase during the quarter, high-end and well-established villa communities continued to shine, achieving sales price growth nearing 6%.
Additionally, prime and high-quality off-plan projects on Saadiyat and Yas Islands garnered favorable reception, commanding sales prices ranging from Dhs1,500 to Dhs3,800 per square foot.
Dubai’s Market: Asteco highlighted that approximately 11,000 residential units were delivered in Dubai during Q2 2023, with apartments comprising the majority (9,400 units). While villa supply exhibited a slower pace over the quarter, expectations foresee an uptick in the latter half of the year, followed by a further surge with nearly 20,000 completions projected for 2024/25.
Amidst ongoing demand from both current and new tenants, the Dubai market is not impervious to shifts in real estate dynamics, even at the micro level. Some areas, such as Meydan, Arabian Ranches 3, and Al Furjan, saw marginal rental growth due to an influx of supply. Conversely, favoured communities like Dubai Silicon Oasis, Jumeirah Beach Residence (JBR), and The Greens/Views experienced above-average rent hikes due to limited availability and tenant mobility.
In the rental market, average rates for apartments, villas, and offices grew by 6%, 3%, and 6% respectively over the quarter, and by 21%, 23%, and 25% annually. Although upward pressure persisted across all asset classes, the rate of increase moderated in certain communities and asset segments, particularly in the villa category.
The high-quality, hybrid, and co-working office space market continued to witness burgeoning demand and options, with office rentals maintaining robust performance, particularly in Grade A spaces.
In terms of the sales market, Dubai’s sales price growth displayed signs of deceleration, with quarterly increases of 2% for apartments, 3% for villas, and 4% for offices. On an annual basis, changes stood at 14%, 15%, and 22%, respectively. Notably, Dubai’s beachfront locations like Palm Jumeirah, Jumeirah Bay Island, Bluewaters, and Madinat Jumeirah Living, along with ‘desert destinations’ such as Lanai Island, witnessed record-setting sales.
Asteco highlighted an increased trend of tenants transitioning into homeowners, which is expected to persist in the second half of 2023 and well into 2024.
The real estate market in the Northern Emirates sustained positive growth, driven by various factors that make it appealing to both residents and investors. The leasing market, in particular, benefited from an overflow of Dubai tenants in the face of rising rents.
Original article reference: Gulf Today.