Prices in the UAE continue to plummet: what is happening to real estate
It is a fact: the residential real estate market in Dubai is experiencing a critical period, characterized by an exponential excess of supply. The decline began as early as the end of 2018, with an average monthly value of 8%. But that is not all. In general, this land so emblematic and representative of the most unbridled luxury, especially in terms of property,
found a deficit also in the luxury segment.
In detail, the prices of the villas decreased by 8.97% (-7.5% adjusted for inflation) in the same period examined previously. Add to this the deep depression of the Abu Dhabi market. In fact, already in February, the decline in the residential sector price index fell by 7.12%, both in terms of luxury, but also of the more affordable properties.
So why do investors fail to trust and do not invest like they used to?
Until recently, buying a property in these areas would have been synonymous with a real lasting investment over the years, in terms of value. Today, however, given the widespread economic uncertainty and above all an offer that is too disproportionate to the present demand.
Furthermore, in 2018 approximately 40,000 units were added to the Dubai residential total and only 8,000 to that of Abu Dhabi, reaching 251,000.
Among the various elements that have greatly affected this very unstable situation, we recall:
• the Federal Mortgage Cap, introduced in 2013, has averted the rise in residential prices in Abu Dhabi and Dubai.
• the market was also affected by the application of value added tax (VAT) in January 2018. 5% VAT currently applies only to home sales three years after the completion of the project. Sales within three years of completion have a VAT rate of 0%.
• the Dubai Territory Department has recently doubled the property registration fees from 2% to 4% to decrease the demand for real estate.
In general, however, the UAE economy has recorded an increase compared to 2018, after the period of stalemate of previous years. According to forecasts, economic growth should be accelerated, thanks to the support of numerous activities.
As for the gross rental yields in Dubai, now they say they are moderate.
The apartments currently in beautiful Dubai sell for around 4,400 US dollars per square meter. Wanting to do a more detailed analysis:
• Medium-sized apartments: an average of $ 5.900 per square meter (sqm)
• The smaller apartments (90 square meters) are cheaper, with a sale of around 4,400 dollars per square meter.
• Based on the research of previous years, we imagine that significantly smaller apartments of, say, 70 square meters. and below, it could earn rental returns of up to 7%.
In conclusion we can say that the returns in Dubai are stable, but the days in which Dubai has generated stratospheric returns are now concluded.
found a deficit also in the luxury segment.
In detail, the prices of the villas decreased by 8.97% (-7.5% adjusted for inflation) in the same period examined previously. Add to this the deep depression of the Abu Dhabi market. In fact, already in February, the decline in the residential sector price index fell by 7.12%, both in terms of luxury, but also of the more affordable properties.
So why do investors fail to trust and do not invest like they used to?
Until recently, buying a property in these areas would have been synonymous with a real lasting investment over the years, in terms of value. Today, however, given the widespread economic uncertainty and above all an offer that is too disproportionate to the present demand.
Furthermore, in 2018 approximately 40,000 units were added to the Dubai residential total and only 8,000 to that of Abu Dhabi, reaching 251,000.
Among the various elements that have greatly affected this very unstable situation, we recall:
• the Federal Mortgage Cap, introduced in 2013, has averted the rise in residential prices in Abu Dhabi and Dubai.
• the market was also affected by the application of value added tax (VAT) in January 2018. 5% VAT currently applies only to home sales three years after the completion of the project. Sales within three years of completion have a VAT rate of 0%.
• the Dubai Territory Department has recently doubled the property registration fees from 2% to 4% to decrease the demand for real estate.
In general, however, the UAE economy has recorded an increase compared to 2018, after the period of stalemate of previous years. According to forecasts, economic growth should be accelerated, thanks to the support of numerous activities.
As for the gross rental yields in Dubai, now they say they are moderate.
The apartments currently in beautiful Dubai sell for around 4,400 US dollars per square meter. Wanting to do a more detailed analysis:
• Medium-sized apartments: an average of $ 5.900 per square meter (sqm)
• The smaller apartments (90 square meters) are cheaper, with a sale of around 4,400 dollars per square meter.
• Based on the research of previous years, we imagine that significantly smaller apartments of, say, 70 square meters. and below, it could earn rental returns of up to 7%.
In conclusion we can say that the returns in Dubai are stable, but the days in which Dubai has generated stratospheric returns are now concluded.
