COVID-19: No better time for UAE expats to enter the real estate market

Dubai: Real estate is an asset class that was beaten down big in the aftermath of the pandemic. Experts now forecast that it will make a comeback but with a slight lag. But what does this mean for investors and buyers?

With the current pandemic backdrop, it has been widely recommended that those who are looking to enter the market for the first time should have slightly longer-term outlook as various macro factors are in the play such as availability of funding, banks’ risk appetite to lend, and revival of the job markets.

Pandemic-related property flux ease

However, with wider pandemic-related uncertainty dissipating globally with multiple developments around a potential vaccine, an economic rebound is in sight – which results in recovery in all facets of an economy. This is excellent news for real estate investors in the UAE, particularly the real estate segment – that makes up nearly 40 per cent of economic growth.

So if one has the liquidity and means to support a mortgage now, property consultants and analysts are currently recommending that now is a great time to buy as valuations are attractive and cost of real estate-related funds are at the lowest.

However, before we elaborate on the current prospects surrounding investing in real estate funds and related stock market assets, let’s first discuss an integral part to investing in them. As investing in market-traded assets are highly-dependent on how the UAE property market is currently performing, it is vital to first gauge how investor-friendly the sector is right now.

The UAE’s real estate industry last week registered improvements in global property consultant and investment manager JLL’s 2020 Global Real Estate Transparency Index (GRETI).

JLL’s GRETI 2020 provides a reliable measure of real estate market transparency and is a useful indicator of a city’s overall ‘real estate investment health’. In this year’s edition, the index reveals the increasing attractiveness of Dubai and Abu Dhabi as global investment hubs within the region.

Affordability within Dubai compared to similar global cities is valued by multiple experts as ‘excellent’ and it should also be noted that the UBS Global Real Estate Bubble Index marked Dubai as ‘fair valued’ compared to cities like New York, London and Paris.

UAE expats among top investors

Indians topped the investors’ list in Dubai’s real estate sector last year, according to official figures released last week. A total of 5,246 Indians has invested in the property market in the emirate as per the Dubai Land Department (DLD) records, followed by 5,172 Emiratis.

As many as 2,198 Saudi investors have chosen assets in Dubai. Chinese investors in Dubai real estate number to 2,096 followed by the UK with 2,088. The investors from Pakistan came sixth with 1,913 followed by Egypt (955), Jordan (855), the US (682) and Canada (678).

Expats lead in investment value

Indians also topped in investment value, injecting more than Dh10.89 billion last year into the emirate’s property sector, followed by Dh8.1 billion by Emiratis, Dh4.92 billion from Saudi Arabia, Dh3.97 billion from the British investors and Dh3.65 billion by the Chinese nationals.

Investors from Pakistan pumped in Dh2.79 billion into the emirate’s real estate sector last year, followed by Jordan (Dh1.57 billion), Egypt (Dh1.42 billion), France (Dh1.1 billion) and the US (Dh1.25 billion).

Shine seen after a few plateaued years

It’s been increasingly evident that the real estate industry in the UAE has had a rocky few years. Weakened consumer sentiment, an oversupply in some locations, and a slowdown in government spending as result of lower oil prices had all combined to produce an uncertain outlook – and that was before the arrival of the pandemic earlier.

While some markets, such as Sharjah, and some developers have certainly outperformed others, the industry as a whole, matter experts view, is undergoing something of a reset. This is important in the context of the UAE’s overall economic picture, where the housing market plays an outsized role. (In 2018, Dubai’s property segment contributed 13.6 per cent of GDP, while the figures for Abu Dhabi and Sharjah respectively were 14.4 per cent and 10.7 per cent.)

All things in buyer’s favour now

If you are a prospective house buyer in the market, all things are going in your favour now. Low mortgage interest rates, higher LTVs (loan to value), reduced service charges and attractive valuations make for a win-win situation.

Following a period of job losses, salary cuts, uncertainty about job prospects and tightening of credit standards – which was seen adversely affecting demand for property, buying appetite is seen returning to market as dire economic conditions ease. So, with improving clarity on cash flow for the near to mid-term future, as expected, analysts view the property market on track for a rebound.

Why is it a buyer’s market now?

Here are the factors that are currently making UAE real estate sector a buyer’s market:

  • • Low mortgage interest rates
  • • Higher loan to value ratio available
  • • Affordable property sales prices
  • • Reduced service charges
  • • Attractive price valuations
  • • Developer incentives such as service fee waivers, free appliances, etc

Does this mean market uncertainty has passed?

Both the rental and sales market in Dubai was expected to remain under downward pressure due to the market uncertainty brought on by the pandemic. However, it has become increasingly evident, particularly with the potential advent of an imminent vaccine, that market uncertainty has eased and things are finally looking up for the sector.

A potential contraction in income levels did make some buyers delay their decision making at the onset of the pandemic, data analysis showed. Besides a drop in demand, the limitations to physically view properties and conduct business also led to extended transaction timelines.

However, lower entry price points, attractive interest rates and the favourable loan-to-value ratio due to the increase of five percentage points for first-time buyers (which means that they have to put up less cash as down payment) have improved affordability in the secondary sales mortgage market.

Moreover, several developers are also offering service charge waivers for up to two years after handover, free kitchen appliances and gadgets as incentives to attract buyers in a down market. This is incentivising property purchasers to take advantage of the current improving market conditions.

Attractive borrowing rates attract buyers and the industry expects banks to step up their exposure to real estate and the construction sectors, a spike in re-mortgage activity due to attractive borrowing rates and other promotional discounts being offered.

Owing to the current turmoil in the global economy as a result of COVID-19, UAE banks did tighten their lending appetite based on client profiles and industry segments that struggled the most during the pandemic, which led to existing customers deferring current monthly obligations and a reduction in banks’ earnings.



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