Dubai house prices fell by 2.93% during 2020

The suffering of the UAE’s housing market seems unending, with a huge supply glut of both apartments and oil. In Dubai, residential property prices fell by 2.93% during 2020, an improvement from the prior year’s 4.05% decline. During the latest quarter, house prices in Dubai increased slightly by 0.52% q-o-q.

Dubai's property market has been one of the world's most volatile. Dubai saw one of the world's worst housing crashes from Q3 2008 to Q3 2011 with house prices plunging by 53%. The housing market started to recover by end-2011 with prices rising by a total of 67% until Q4 2014. The housing market has been depressed since.

House prices in Dubai are expected to continue falling in 2021, mainly due to huge supply, aggravated by low demand due to the COVID-19 pandemic. In Q4 2020, about 26,000 units were added to Dubai’s total residential stock, bringing the total supply to more than 611,000 units, according to JLL MENA. In Abu Dhabi, around 3,000 units were added in Q4, bringing the total stock to 267,000 units. 

Several other factors have affected the market. The Federal Mortgage Cap, introduced in 2013, has slowed the pace of residential value appreciation in Abu Dhabi and Dubai. In addition, the Dubai Land Department recently doubled property registration fees from 2% to 4% to dampen property demand. Finally the implementation of the value added tax (VAT), which became effective in January 2018, is another factor. The 5% VAT only applies to home sales after three years of the project´s completion. Sales within three years of completion have 0% VAT rate.

Rents, rental yields: good yields in Dubai at 5.19%

Dubai apartments are costly at around $5,918 per sq. m. 

UAE: typical city centre apartment buying price, monthly rent (120 sq. m)
  Buying price Rate per month Yield
Dubai   $710,160   $3,070 5.19%

Recent news. The UAE economy was estimated to have contracted by 6.6% last year, in contrast to a 1.7% growth in 2019 and the biggest fall in 34 years, amidst a crude oil price crash caused by the COVID-19 outbreak, according to the IMF. The UAE economy is now expected to grow by 1.3% this year and by another 2.2% in 2022.