While on one hand mobility restrictions, social distancing, limited workforce, and other COVID-19 precautionary measures have had an impact on the Dubai residential construction sector, on the other hand, industry experts have pointed to the slowdown in the residential construction as a “blessing in disguise”.
Sapna Jagtiani shares her insights on the impact of COVID-19 on the Dubai residential real estate market, which is already riddled with a supply glut and strong pipeline of properties.
Jagtiani approaches supply from two angles – firstly, from the pre-sold, under construction angle; and secondly, from the perspective of new launches.
“We have seen some delays in the under-construction activities. We noticed that some construction activities in Dubai were paused due to movement restrictions, while many others slowed down. Overall, since a lot of these properties are pre-sold, these are just temporary delays. These units will eventually be delivered and will add to the supply glut,” Jagtiani explains.
“The good news is on the new launches,” she continues. “New launches have slowed down significantly – almost dried up. This was noticed during the lockdown phase, and even after, due to travel restrictions, sales to international buyers has not been easy.”
As a result, developers are now focused on selling existing inventory to ensure that there’s a buyer behind every unit that they are constructing.
“On a whole, with more than 100,000 additional units to be delivered over the next 1-2 years, any meaningful halt in the supply will probably be post-2022,” Jagtiani says.
Sapna Jagtiani also shares her insights on project funding, capital funding, and when she expects the Dubai residential real estate market to bottom out.
“Until the structural oversupply issues are dealt with — around 2022 — we may not see price stabilisation,” she says.
S&P Global Ratings has confirmed that it has a fairly grim view of the Dubai residential real estate prices over the next two years. The firm expects the drop in residential real estate prices to be steeper in H2 2020, despite lower movement restrictions.
“We believe the price declines will linger well into 2021. The negative employment trends and lower purchasing power will also weigh on the demand for properties. Therefore, we expect developers to intensify their offers and incentives on new property sales, whether they are rent-to-own schemes, or cash rebates, or waivers on service fees and maintenance fees,” Jagtiani says.
“We believe the recovery process will be long, very slow, and at the moment it’s quite uncertain whether the World Expo in 2021 will shore up market sentiment or lead to a meaningful recovery.”
(Source: Construction Week YouTube channel)
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