Home sales transactions fell by almost 50% between the first two quarters of the year as the effects of the Coronovirus pandemic hit the UAE real estate market, according to a new report by consulting firm ValuStrat.
In its new UAE real estate martket ‘1st Half 2020’ report the firm explained that the first six months saw the completion of an estimated 14,000 (30%) of the 45,700 residential units scheduled to handover this year.
Q2 residential home sales transactions totalled 4,459, down 48.8% QoQ and 39.3% YoY with a value of AED 7 billion and an average ticket size of AED 1.57 million. Off-plan sales represented 66% of all home sales.
In terms of commercial property, office sales transactions during the second quarter of 2020 were 80.2% lower when compared to the same period last year.
“Overall transacted office prices fell 2.8% YoY and 7% QoQ to AED 7,169 per sq m (AED 666 per sq ft). Median office asking rents declined 8.6% annually but remained stable quarterly and stood at AED 864 per sq m (AED 80 per sq ft) for typical office units. Citywide office occupancy stood at 80.4%,” revealed the ValuStrat.
Unsurprisingly, the retail sector was also hit hard by the introduction of lockdown measures required to protect UAE residents from the spread of the Coronavirus.
“Majid Al Futtaim’s 2019 report announced 92% average occupancy for its malls in Dubai. Mall footfall across its entire portfolio grew 4% YoY and reached a record of more than 200 million visitors. The first half of 2020 saw movement restrictions negatively impact retail footfall, accelerating efforts towards e-commerce expansion, and with restrictions being eased towards the usually quite summer period, many stores offered price discounts and promotions to entice shoppers,” said ValuStrat.
Hospitality likewise also was affected negatively by the pandemic: “As movement restrictions due to the COVID-19 pandemic negatively impacted tourism on a global scale, it was to be expected that between March and June, hotel rooms and hotel apartments were vacant for the most part, and some hotels were closed. A publication from HotStats reported that the average Revenue Per Available Room (RevPAR) during the month of May was record low AED 47.2, down 84.4% when compared to May last year. Dubai’s combined average RevPAR for the period January to May this year was AED 328.8, 48.4% below the same period last year.”
The UAE has been no exception to global economic disruption caused by the public health emergency after a strong start to the year, said ValuStrat.
“The first quarter of the year had a relatively good start, particularly January and February. However, lock-down measures were implemented during March. While the last part of the second quarter witnessed movement restrictions being gradually eased.
It came as no surprise that real estate markets were shaken by the pandemic and its resulting lockdowns, especially in the hospitality, leisure, retail, and office sectors. Residential markets were also impacted, as home sales and rental transactions dropped to record lows. There were reports of mass layoffs by major developers, banks, and airlines, and with restricted travel, population growth was at its minimum. This negatively impacted much of the economy, trickling down to the real estate market.
“The real estate sector plays a big role in the UAE’s economy, primarily in Dubai. In addition, the other member emirates, notably the capital Abu Dhabi, have shown great strides in developing their local property market in the past few years. The sector’s contribution as per latest data, stood at 5.4% (AED 80.2 billion), 7.4% (AED 15.5 billion) and 3.6% (AED 28.7 billion) of GDP at constant prices for the UAE, Dubai, and Abu Dhabi, respectively.
“Our latest findings have already shown COVID-19 pandemic impact on real estate activity which may result to contraction in its contribution to the economy. Dubai’s Consumer Price Index (CPI) as of May 2020 fell 3.5% when compared to May 2019. And as residential rental rates were falling, the housing, water, electricity, and gas index down 6.3% annually. Similarly, for Abu Dhabi, the general CPI fell 4.2% annually with the housing index fell 5.6% annually.”
The full report can be accessed here.