Real estate activity in Dubai has shown “impressive levels” over the past few months despite the coronavirus pandemic, according to the chief commercial officer of a United Arab Emirates-based property developer.
Aqil Kazim of Nakheel’s remarks come as real estate transactions in the second quarter of 2020 fell by 38.8% compared to the same period last year. The Dubai Land Department reported 5,559 transactions in the April to June quarter this year, a decline from 9,088 in 2019.
According to Kazim, these are “unprecedented times,” with the coronavirus pandemic affecting the market. The UAE has recorded 62,525 confirmed cases of the coronavirus and 357 deaths, based on the data compiled by Johns Hopkins University.
“But you know, despite these circumstances, we have witnessed impressive levels of real estate activity in the last few months,” he said during an interview on CNBC’s “Capital Connection.”
Meanwhile, transaction volumes for the first half of the year dropped 12.4% from the first half of 2019, after increasing in the first quarter. The Dubai Land Department recorded 15,883 sales from January to June in 2020.
Citing the figures, Kazim described the outcome as an “active performance.”
“As far as Nakheel is concerned, we ourselves have sold more than 800 million dirhams ($217.8 million) worth of property since March, and that’s including during the height of the pandemic. This really highlights investors’ trust and confidence in Dubai’s real estate sector,” he said.
According to real estate services firm Asteco, the decrease of the loan-to-value ratio and a “partial release of pent-up buyer demand” led to an “immediate bounce” in sales toward the end of the second quarter, particularly when authorities loosened the restrictions.
Kazim noted that consumers are seeking larger gardens and living spaces for the “new normal” where people work from home and children study at home.
“People have actually started to make that decision to invest in a property that they probably held back in the previous years because of this change in buying behavior,” he said, describing these end-user purchases a “commitment” to Dubai.
Consulting firm ValuStrat predicts that property transactions may soar in the medium term.
“Price drops, lower lending rates and sweetened (loan-to-value) rules may encourage some potential buyers to make a purchase,” it said in a review of the market.
Meanwhile, rents for apartments, villas and offices could continue to fall, according to Asteco’s report. “Asteco anticipates that this pattern is likely to prevail, or even intensify due to the expected volume of additional supply combined with a potentially sharp drop in demand in the short-to-medium term due to the impact of COVID on employment.”
Real estate worldwide
Real estate activity in the US is also showing signs of recovery. In June, real estate updates during the coronavirus crisis appear promising with the 13% increase in sales of newly built homes, according to the US Census.
The sales of newly built homes slowed dramatically in March as the coronavirus halted the economy. However, they recorded the strongest May pace since 2007. Builders themselves were also surprised about the level of recovery. However, housing starts were not nearly as strong, and builders trying to manage the demand.
“Sales of homes not yet under construction are rising given capacity limitations in the building industry,” said Robert Dietz, chief economist at the National Association of Home Builders.
“Due to labor and land constraints, homebuilders were already producing too few single-family homes given potential demand. As housing demand has picked up in recent weeks, builders have shifted sales to homes not yet under construction – a 20% year-over-year gain for such sales,” he added.
