After a spate of ultra-luxury and luxury housing sales, mid-tier developments look to drive the UAE’s real estate market
Propelled by factors like a high influx of international visitors, continued ease of doing business, and a buffer against global headwinds such as high inflation due to government policies, the UAE’s real estate sector is experiencing massive growth.
In Dubai, real estate transactions reached a total value of Dhs157bn in Q1 2023, marking an increase of 80 per cent from the same period last year, tweeted Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai in April.
Property sales and mortgages worth Dhs27.9bn were recorded by Abu Dhabi’s Department of Municipalities and Transport (DMIT) in Q1 2023. The number marks a jump of 147 per cent from Q1 2022. The capital city’s 5,472 sales and mortgage transactions bookmark a 66 percent rise from the same period last year.
Real estate transactions in Sharjah touched 21,486 with a total value of Dhs5.9bn, as the Sharjah Real Estate Registration Department (SRERD) reported. Generally, properties in the Dhs500,000 to Dhs1.5m bracket enjoyed the most popularity, demonstrating strong demand for reasonably priced housing.
In January 2023, leading UAE developer Damac predicted a spike in the mid-market property sector, with the shift in demand being attributed to a preference for value-for-money options, availability of financing options and changes in visa rules that now allow residency permits for retirees and remote workers. Sales figures from Jumeirah Village Circle (JVC), Town Square and Arjan confirm the prediction. Sales volumes in JVC jumped by 169.7 per cent, with 5550 units sold in just Q1 of 2023 compared to 2,058 sold in 2022. Arjan recorded a hike of 87.10 per cent with 1418 units sold in Q1 2023 against 758 sold in 2022. Town Square was the best-performing area, with 1451 units sold in Q1 2023 compared to 316 in 2022, a 359.2 per cent rise.
According to real estate portal Property Finder’s data for April 2023, 58.2 per cent of buyers looked for apartments. Among home seekers, the most commonly searched apartment size was two-bedroom, accounting for 35.2 per cent, followed by one-bedroom apartments at 31 per cent. Villas and townhouses garnered an interest of 41.8 per cent. “The overall market scenario currently inclines towards a significant increase in ownership figures, demand for bigger spaces, high returns on investments, and a stable momentum in mortgage transactions. We are also seeing consumer buying behaviours shift towards more long-term investments, as tenants increasingly prefer ownership over rentals,” says Scott Bond, UAE country-manager at Property Finder.
Abu Dhabi-based developer, Bloom Holding, echoes the same sentiment. “Investors looking for value for money are increasingly looking to purchase townhouses and apartments. We have also witnessed an uptick in appetite among expats in the UAE, specifically towards buying townhouses and apartments for themselves and their families to live in. Whether it be young professionals, couples, or families alike, there is an increase in desire for apartments in mixed-use communities that offer a lifestyle including excellent, integrated facilities such as parks, schools, retail spaces, wellness centres and more,” says Carlos Wakim, ceo of Bloom Holding.
For Dubai’s Samana Developers, the mid-tier developments balance affordability and quality – a perception that emerged during 2020. “As Dubai is expanding and job opportunities arise, there is a need for housing options that are more affordable than luxury properties. Mid-tier provides opportunities to investors and attracts them to invest for the sake of stable return and lower entry barriers,” says Najmeh Jafari, general manager at Samana Developers.
Further, demand for mid-tier villas and townhouses spurred the rental market too. According to Bayut Dubai’s rental market report 2022, rental costs experienced a growth of up to 23.4 per cent in the affordable segment. Tenants paid Dhs36,000 for studios, Dhs51,000 for 1-bed and Dhs73,000 for 2-bed flats as average annual rent during 2022. In the UAE capital, while villa rentals increased by 12 per cent in the mid-tier segment, apartment rentals decreased by up to 9 per cent.
Rental hikes are pushing people to buy their own homes. “With positive market sentiment and a raft of demand drivers, Dubai’s real estate market has seen a robust rise in sales prices and rents across segments. While high-interest rates and rising sales prices are pushing the acquisition costs higher, particularly for mid-income end-user buyers, a sharp rise in rents and high rental yield are driving many residents to homeownership. This is further evidenced by the continued rise in secondary market transaction volumes, both in cash (23 per cent) and mortgage transactions (11 per cent) when comparing Q1 2022 vs. Q1 2023,” says Prathyusha Gurrapu, head of research and advisory at CORE.
Overall secondary market transactions in 2022 saw a 50 per cent increase compared to 2021 while the off-plan market saw a massive 84 per cent rise, mostly due to the higher number of off-plan launches and inventory available compared to previous years.
A list of upcoming mid-tier developments in the UAE
Samana Ivy Gardens
Ivy Gardens is Dubai-based Samana Developer’s first environmentally and economically sustainable residential complex. The Dhs350m project will be heat resistant, energy efficient, and recycle its grey water. Located in Dubailand, Ivy Gardens will span 300,000 square feet with 348 apartments comprising studios, one-bedrooms, two-bedrooms and three-bedrooms, each with a private pool. Other amenities include a health club, indoor and outdoor gym, sauna and steam room, a large leisure pool deck, valet parking, a barbeque area, a kids’ play area and outdoor cinema.
Westwood Grande II
Spurred by the success of the first phase of Westwood Grande in Jumeirah Village Circle, Imtiaz Developments recently announced plans to launch the second phase of the residential project. Westwood Grande II will offer fully-furnished studios and one-bedroom apartments powered by smart-home tech. Other value-added features include a rooftop infinity pool, gym, landscaped gardens and children’s play areas.
Substantial progress continues at Arada’s Aljada development in Sharjah. The mixed-use destination is the emirate’s largest ever, containing 25,000 homes, most of which are apartments. To date, Arada has sold 9,000 homes and completed 6,300.
Arada aims to complete 2,500 homes at Aljada in 2023 and has several launches planned. One of the most ambitious projects is a new district scheduled to be launched by the end of the first quarter. The Dhs24 bn Aljada masterplan includes serviced apartments; kindergartens, four schools; polyclinics and two health centres; four mosques; a cycling pathway; two post offices; a public library; a civil defence centre; and a municipality office.
Under its Bloom Living project, Abu Dhabi’s Bloom Holding has many mid-market projects to be delivered shortly. Bloom Living is split into three phases, Cordoba, Toledo and Casares, scheduled to be completed by Q4 2024, Q2 2025 and Q1 2026, respectively. The projects feature two- and three-bedroom townhouses and apartments ranging from studios to one-, two-, three- and four-bedrooms. Cordoba, set for completion this year – sold out within four hours of their release. All of Toledo’s townhouses are sold out too. Bloom launched the third phase of Casares in May 2023.
“The UAE real estate market is in an exceptionally strong place at the moment, boosted by almost unparalleled investor and end-user demand that has resulted from wise government regulatory policies and a favourable geopolitical environment,” says Ahmed Alkhoshaibi, group CEO of Arada.
“By repurposing and retrofitting existing buildings and creating mixed-use spaces, developers are transforming urban areas into vibrant communities,” points out Jafari. “This trend offers opportunities for mid-market residential developments in revitalizing city centers,” she says.
Almost all mid-market projects have enjoyed exceptional success, selling out on launch day. “This clearly demonstrates both end users and investors’ appetite for high-quality, mid-market projects,” says Wakim. However, the positive response to these projects also indicates a gap in the market – buyers want homes that are in a competitive price range but do not compromise on quality. Most of the UAE’s developers are keeping pace with the rapidly evolving and diversifying real estate landscape to provide the type of products that offer value for money to investors.
With the mid-market sector flourishing equally, developers must allocate sufficient resources to this sector. “While there are several challenges with regard to developing for the mid-market, efficiency and costs will remain the watchword, and everything, from finishes to procurement processes, contractor management and planning, will have to be that much tighter,” cautions Alkhoshaibi.