UAE real estate shows robust performance in Q1

The average rental rates in Dubai’s apartment and villa continued to record strong growth in Q1 2023, particularly in higher-quality developments, with quarterly increases of 4 per cent and 7 per cent, respectively, data showed on Wednesday.

According to Asteco Q1 2023 report, the annual rental growth in the villa segment was significant, at 25 per cent, while average apartment and office rental rates rose by 19 per cent.

“In the Dubai rental market, there has inevitably been a growing gap between landlord and tenant expectations. After burdening years of decreasing rent, many landlords have sought to benefit from favourable market conditions. This has resulted in attempts to secure significant rental increases at lease renewal,” the report by the real estate services company stated.

In Q1 2023, the Dubai market recorded a delivery of approximately 7,600 units matching the volume registered in the final quarters of 2022. The villa supply picked up significantly with approximately 2,150 units handed over, representing more than double (circa 1,000 units) in the previous quarter, data showed.

Despite ambitious development plans, Asteco believes that project handover delays are likely to limit full-year apartment and villa completions to 35,000 and 6,800, respectively. “While the updated 2023 projections represent a decline on earlier forecasts, it is worth noting that the supply of new villas represents a significant increase over the previous year with a total of 27,000 apartments and 3,930 villas handed over,” the report said.

Although there is growing concern over the volume of future supply, Asteco expects 27,400 apartments and 4,650 villas to be completed by the end of 2023. “The appetite for new project launches continues to be well received by investors and end-users,” the report said. Villas continued to be the predominant focus of demand translated into higher rental and occupancy rates, it added.

Office rental rates also grew on average by 6 per cent over the last three months, although net effective rents may have been influenced by additional incentives. Annual rental increases stood at 21 per cent.

The annual increase for apartments and villas grew at a robust 17 per cent Y-o-Y, nevertheless, the price increase over the quarter still stood at a relatively strong 3 per cent and 5 per cent for apartments and villas, respectively.

With so many forces at play, Asteco anticipates momentum to continue throughout 2023 albeit at a more sustainable rate than 2022.

Abu Dhabi

The report indicates that the Abu Dhabi market recorded the delivery of approximately 1,600 residential units in Q1 2023, largely distributed across the established international investment zones of Al Raha Beach, Al Reem Island and Saadiyat Island.

In addition, a number of noteworthy projects were also launched in Q1 2023 spread across Yas, Al Reem and Saadiyat Islands. Furthermore, with several new projects currently in the planning & design stage and anticipated to launch over the year, Abu Dhabi’s development pipeline throughout the rest of 2023 shows no signs of slowing down.

While apartment rental rates show stability, prime and high-quality apartment developments registered an average rental increase of 2 per cent in Q1 2023. However, these increases were generally limited to new tenants. The villa rental market continued its upward trajectory in Q1 2023, with an average quarterly increase of 2 per cent. Prime villa communities saw the largest increases of up to 5 per cent. The market also saw strong demand for office space in Abu Dhabi, particularly for Grade A/B+, predominantly in prime locations.

The office rental market also remains stable, with no change recorded over Q1 2023. However, in tandem with growing business confidence, Asteco has registered a renewed level of interest across various districts of the city.