The property report - UAE 2021
Real estate activity in the UAE during 2020 was severely disrupted by the COVID-19 pandemic. The lockdown measures introduced by the end of March, led to a near standstill in transaction activity across all asset class. Sales and leasing activity across office, residential and warehousing developments reached an all time low. However, as companies and individuals adjusted to the new living and working patterns, we started observing off shoots of growth by end of April and early May.
The introduction of a stimulus package by the Central Bank was a shot-in-the-arm to the property market once lockdown restrictions were eased. We witnessed a gradual increase in demand, especially across the residential sector in H2 2020. A relaxation in LTV (Loan to Value) laws encouraged more investment appetite into the sector. Banks also increased their exposure to real estate and the construction sector, and a spike in re-mortgage activity was witnessed due to attractive borrowing rates and other promotional discounts.
The upfront deposits required to buy a residential property was reduced as individuals now have an additional 5% borrowing ability as part of the relaxed LTV laws. The Abu Dhabi government also waived off (for the entire year) real estate registration fee of 2%.
As a result of these measures, transaction activity increased. Individuals who were renting found it more affordable and lucrative to purchase their own property. A continued softening in asset pricing and completion of new projects in the last few months have offered a value proposition to end-users to upgrade their current real estate to better quality stock. However, the residential market witnessed a slowdown in demand from international investors due to restrictions in travel.
At a corporate level, key decisions relating to fresh office space requirements were delayed or postponed, which in turn increased the number of activities in lease renewals.
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