Dubai Sees Few Luxury Building Launches in Coming Months

Dubai’s luxury residential market had a tough year in 2020, as the Covid-19 pandemic upended supply and demand. As a result, the city’s housing prices continued to fall in the past year.

The total volume of transactions for the Dubai prime-home market shrunk by more than 30% to AED 29.5 billion (US$8.3 billion) from the record AED 42.3 billion (US$11.52 billion) in 2019, while the average price per square foot went down by 5% year over year, according to a recent report based on data from the Dubai Land Department.

Before the pandemic, average sales prices in Dubai’s luxury communities were already down 20% to 30% from their last peak in 2014, due to an oversupply of homes for sale, particularly in new developments. The long-awaited Dubai World Expo was expected to fuel the city’s property market in 2020 by drawing tens of millions of visitors and much-needed foreign investment. However, the mega event, which was planned for last October, is now rescheduled to run from Oct. 1, 2021, to March 31, 2022.

The pandemic and the expo’s postponement have led the Dubai housing market into a slump, with high-end developers temporarily halting new projects. Emaar, the city’s largest developer, announced in December that it has stopped building new developments.

Meanwhile, the Dubai government also hit breaks on the city’s property market by setting up a committee to monitor and regulate future supply. The authority is incentivizing home-buyers to purchase already completed properties by offering up to 80% financing for those purchase-ready projects, compared to the 50% for buying off-plans.

The government is also raising some financial requirements for developing off-plan projects. The Gulf News reported that private developers may need to put up 50% of the project value in the form of equity bank guarantees, increased from the earlier requirement of 20%, to win the government approval.

The silver lining is that industry experts are now seeing positive signs indicating Dubai’s prime home market might see a speedy recovery in 2021, once global travel resumes and the pandemic eases.

“As we move into 2021, we are still seeing incredible levels of demand for both sales and rentals across the city,”.

“The rapid economic recovery of the city, continued infrastructure development and the rapid deployment of the Covid vaccine are among the factors that are expected to boost real estate investment this year,”