The UAE real estate market’s recovery from the COVID-19 pandemic is accelerating, supported by improving economic performance fuelled by high oil prices as well as increasing relocations, particularly from Russia, said Fitch Ratings.
However, some sectors, including the Dubai office market, may take several years to fully recover due to oversupply. The UAE real estate market was anemic during the pandemic, Dubai’s population fell by an estimated 8 percent in 2020 as many expatriates, who comprise about 90 percent of the population, had to leave after losing employment.
Furthermore, economic pressures affected the carbon and non-carbon sectors, including travel, hospitality and retail. However, an effective vaccination program led to one of the highest coronavirus inoculation rates globally, allowing the country to re-open for international business and tourism earlier than most countries. In addition, government initiatives to boost growth and competitiveness, including liberalized visa and residency rules, helped to increase the population.
These initiatives catalyzed the Dubai real estate sector’s recovery in 2021, with the population increasing by an estimated 2 percent. The country’s economy and real estate market have been further boosted in 2022 by increased oil and gas prices, particularly driven by the Russia-Ukraine war and the consequent redirection of global hydrocarbon trade flows.
The sector is further benefitting from an influx of skilled workers and wealthy individuals from Russia to the UAE due to its neutral stance over the invasion and the relative ease of obtaining UAE visas for Russian nationals. This influx contributed to the increase in Dubai residential property purchases of 81 percent in Q1 of 2022 year-on-year, with the total value of transactions rising by 125 percent.
Although a number of new office tenants entered the market in Q1, the bulk of office real estate activity came from incumbents consolidating space and seeking to improve its quality. Renewals accounted for 68.9 percent of the total office area registered under commercial office lease contracts in Q1, according to CBRE Group and the Dubai Land Department.
