Is now a good time to enter or exit Dubai’s real estate market?

As most people know, villas, town-houses and plots which have permissions to build villas/town-houses across Dubai have witnessed an increase in both the value and the number of transactions as a result of the drastic change in consumer behaviour post Covid-19. Most people who can afford to move from apartments with shared facilities to independent properties like villas and townhouses have made a move. In fact, this is a worldwide trend and not just a Dubai market trend as people want less of shared common areas with spacious living becoming the new luxury.

In addition to the significant global consumer motive to switch to villas and townhouses due to the pandemic, in Dubai, prices for villas and townhouses became extremely attractive as the segment was underpriced.

Moreover, the massive difference in service charges between villas/townhouses and apartments have motivated more people to make a move. For instance, in Business Bay, service charges for apartments range from Dhs16 to Dhs25 per sqft – so for an excellent 3,000 sqft apartment, you pay annual service charges of Dhs48,000 to Dhs75,000. Whereas you could pay an average of Dhs3.5 per sqft for a villa or townhouse, so for a similar 3,000 sqft property, the service charge will be an average of Dhs10,500 per year.

The lack of supply for villas in light of the incremental demand has also pushed prices up. Villas/townhouses and plots for them saw values rising by anywhere between 30 per cent (in places such as Dubailand) to 150 per cent (in Jumeirah Bay) when compared to the prices during Q1/Q2 2020 during the peak of Covid-19 lockdowns.

That being said, is now a golden opportunity to exit or to enter the villas/townhouses market? Well, I believe that the substantial increase during the past nine months in the prices of villas/townhouses have helped shift the segment from being absolutely underpriced to a fair level. The current rates of mid-level properties within the segment are more or less similar to the levels seen in 2013/2014. Whereas the luxury segment has exceeded the 2014 price point.

Yet when you look at that increase and you consider a timeline of six to seven years, you realise that we are indeed not in an overpriced bubble. So I still see some room for a slow and steady price growth for villas/townhouses in Dubai. However the mid market apartments (in Downtown Dubai, Business Bay, Dubai Marina, Palm Jumeirah) may offer better capital gain opportunities in the short-to-medium term.

Lastly, the segment of luxury apartments has also witnessed a very rapid price increase in the last 12 months, yet similar to the villa/townhouse market, this segment was underpriced and it has now come back to its fair price point.

Firas Al Msaddi is the CEO of fäm Properties

Taken from Property Finder’s Prestige special report in Gulf Business’ November issue