Asteco Q1 Shows Robust Performance of Real Estate Industry in UAE

Data released on Wednesday showed that rental rates in Dubai for apartments and villas continued to exhibit strong growth in Q1 2023, particularly in higher-quality expansions, with quarterly growths of 4% and 7%, correspondingly. The Asteco Q1 2023 report highlighted significant annual rental growth of 25% in the villa segment, while average apartment and office rental rates increased by 19%. The report underscores the continued strength of the real estate sector in Dubai, creating it an appealing destination for property acquisition.

Real Estate market in Dubai

“The rental market in Dubai has witnessed a widening disparity between the expectations of landlords and tenants. After several years of declining rent, many landlords are now seeking to take advantage of the favorable market conditions by seeking significant rental increases upon lease renewal, as per the report by a real estate services firm.”

Data shows that in the first quarter of 2023, around 7,600 units were delivered in the Dubai market, matching the volume recorded in the last quarter of 2022. The villa supply saw significant growth with approximately 2,150 units handed over, which is more than double the number (circa 1,000 units) delivered in the previous quarter.

However, Asteco, the real estate services company, thinks that contrary to enterprising growth strategies, project handover pauses are likely to determine the total number of completed apartments and villas to 35,000 and 6,800, respectively, for the complete year.

“Although the latest projections for 2023 indicate a decrease compared to earlier forecasts, it is important to mention that the number of newly constructed villas has notably increased from the previous year. In total, 27,000 apartments and 3,930 villas were delivered, reflecting a significant rise in the supply of new villas,” the report stated.

Asteco anticipates that the volume of future supply is a growing concern, but despite this, they project the culmination of 27,400 apartments and 4,650 villas by the end of 2023.

According to the Asteco Q1 2023 report, villas remained the primary area of focus for rental demand, leading to increased occupancy and rental rates. The report also noted that office rental rates experienced an average quarterly growth of 6%, although the net effective rents may have been impacted by supplementary incentives. The annual rental growth for offices stood at 21%.

According to the report by Asteco, the annual increase for apartments and villas witnessed a robust 17% year-on-year growth, although the price increase in the last quarter was still strong at 3% and 5% for apartments and villas, respectively. The report also highlighted that several factors are impacting the market, and Asteco hopes the speed to persist throughout 2023, albeit at a more bearable charge than in 2022.

According to a report, around 1,600 residential units were delivered in Abu Dhabi’s real estate market in Q1 2023, with most of them located in established international investment zones like Al Raha Beach, Al Reem Island, and Saadiyat Island.

Moreover, some noteworthy projects were launched in Q1 2023 across Yas, Al Reem, and Saadiyat Islands. Additionally, with several new projects in the planning and design stage and expected to launch later in the year, Abu Dhabi’s development pipeline for the rest of 2023 indicates strong momentum.

In Q1 2023, the Abu Dhabi apartment rental market remained stable, but prime and top-quality apartment evolutions experienced an intermediate rental growth of 2%. However, these increases were mainly limited to new tenants. The villa rental market in Abu Dhabi continued to show positive growth, with an average quarterly increase of 2%. The prime villa communities saw the highest increase of up to 5%. The demand for office space in Abu Dhabi was also strong, especially for Grade A/B+ offices located in prime locations.

The average sales prices for completed residential apartment and villa developments remained relatively stable during Q1, although an increase of 2.0% was recorded over the past year. On the other hand, sales rates for off-plan prime and high-quality projects have experienced a surge in recent times. However, it is important to note that these rates are still significantly lower than comparable properties in Dubai, which means that they offer an exceptional value proposition.

The real estate market in Sharjah

The real estate market in Sharjah exhibited strong performance in the first quarter of 2023, as indicated by the Sharjah Real Estate Registration Directorate (SRERD). The sector witnessed a total of 8,592 transactions during this period, with a combined value of Dh5.9 billion. Both the off-plan and completed categories of sales volumes remained robust, with a 47% YoY increase in transactions for the former and a 50% YoY increase for the latter, with most sales being driven by end-users.

In Q1, the Sharjah rental market for apartments experienced a 2% growth, but only an annual growth rate of 2%. The office rental market also saw growth, with a 2% increase more than the previous 3 months and a significant 10% increase compared to the similar duration last year. Sales prices for Sharjah apartments also experienced strong growth, with a 2% increase over the quarter and a substantial 9% increase Y-o-Y.

According to a report by Asteco, rental rates for all types of properties in Al Ain remained stable in Q1 2023. Nevertheless, the overall outlook is positive and improving. The office rental market also remained stable with no significant changes recorded during the quarter. However, Asteco reported a renewed level of interest in various districts of the city in line with growing business confidence.

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