Dubai house prices fell by 4.88% y-o-y in Q3 2020

The UAE’s housing market sufferings seem unending, amidst a huge supply glut of both apartments and oil. In Dubai, residential property prices fell by 4.88% during the year to Q3 2020, following y-o-y declines of 3.27% in Q2 2020, 5.06% in Q1 2020, 4.05% in Q4 2019, and 4.52% in Q3 2019. During the latest quarter, house prices in Dubai fell by 1.36% 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 during the remainder of the year, mainly due to huge supply, aggravated by low demand due to the COVID-19 pandemic. In 2019, about 56,000 units were added to Dubai’s total residential stock, bringing the total supply to 575,000 units, according to JLL MENA. In Abu Dhabi, around 8,000 units were added, bringing the total stock to 265,000 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. Recently, the IMF downgraded its 2020 economic forecast for UAE to a contraction of 6.6%, worse than its earlier projection of a 3.5% decline, amidst a crude oil price crash caused by the COVID-19 outbreak. The UAE economy grew by 1.7% in 2019, following expansions of 1.2% in 2018 and 2.4% in 2017.