Buyers' preference for mid-budget UAE real estate developments

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Spurred by factors such as a large influx of international visitors, continued ease of doing business and protection from global economic difficulties such as high inflation due to government policies, the UAE's real estate sector is experiencing massive growth. In Dubai, real estate transactions reached Dhs157 billion in the first quarter of 2023, an increase of 80 percent compared to the same period last year, Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, tweeted in April.

In the first quarter of 2023, Abu Dhabi's Municipalities and Transportation Department recorded real estate sales and mortgages worth Dhs27.9 billion. This is an increase of 147 percent compared to the first quarter of 2022. The number of real estate and mortgage sales in the capital totaled 5,472, a 66 percent increase compared to the same period last year. According to the Sharjah Real Estate Registration Department, the number of real estate transactions in Sharjah reached 21,486 with a total value of Dhs5.9bn. Overall, properties priced between Dhs500,000 and Dhs1.5m were the most popular, indicating strong demand for affordable housing.

In January 2023, the UAE's leading developer Damac predicted growth in the mid-market real estate segment due to the preference for cost-effective options, availability of financial options and changes in visa regulations that now allow residency permits for retirees and remote workers. Sales figures at Jumeirah Village Circle (JVC), Town Square and Arjan support the forecast. Sales at JVC were up 169.7 percent with 5,550 units sold in the first quarter of 2023 alone, compared to 2,058 units in 2022. Arjan showed an 87.10 percent increase, with 1,418 units sold in the first quarter of 2023 compared to 758 units in 2022. Town Square was the top neighborhood with sales of 1,451 units in the first quarter of 2023 compared to 316 units in 2022, an increase of 359.2 percent.

According to the April 2023 Property Finder real estate portal, 58.2 percent of buyers were looking for apartments. The most popular apartment size among home seekers was one-bedroom apartments at 35.2 percent, followed by studio apartments at 31 percent. Villas and townhouses generated interest 41.8 percent of the time.

"Current real estate market conditions are leaning towards significant growth in the number of owner-occupiers, demand for larger spaces, high returns on investment and a steady increase in mortgage transactions. We are also seeing a shift in consumer behavior towards longer-term investments as tenants increasingly prefer property to renting," says Scott Bond, head of Property Finder in the UAE.

Abu Dhabi-based Bloom Holding expresses the same view. "Investors looking for value for their money are increasingly looking to purchase townhouses and apartments. We have also noticed an increased interest from foreigners living in the UAE, especially in buying townhouses and apartments for themselves and their families. Whether they are young professionals, couples or families, there is an increase in the desire to purchase apartments in mixed neighborhoods offering a lifestyle with excellent infrastructure facilities such as parks, schools, shopping plazas, health centers and more," says Bloom Holding CEO Carlos Wakim.

For Dubai-based developer Samana Developers, the mid-range segment combines affordability and quality - a perception that has emerged in 2020. "As Dubai expands and jobs come up, there is a need for housing that is more affordable than luxury real estate. The mid-range segment offers opportunities for investors and attracts them to generate stable income and lower barriers to entry," says Samana Developers CEO Najmeh Jafari.

The demand for mid-range villas and townhouses also boosted the rental market. According to Bayut Dubai's 2022 Rental Market Report, rental values increased by 23.4 percent in the affordable segment. Renters paid Dhs36,000 for studios, Dhs51,000 for 1-bedroom and Dhs73,000 for 2-bedroom apartments on average per year in 2022.

Rising rentals are encouraging people to buy their own homes. "With positive market sentiment and multiple demand factors, Dubai's real estate market is witnessing rising sale and rental prices across all segments. High interest rates and rising sales prices are increasing acquisition costs, especially for middle-income buyers, but the sharp rise in rentals and high rental yields are encouraging many residents to purchase their own homes. This is further supported by the continued growth in secondary market transactions both in cash (23 percent) and mortgages (11 percent) when comparing Q1 2022 and Q1 2023," says Pratyusha Gurrapu, Head of Research and Advisory, CORE.

Overall, transaction volumes in the secondary market grew 50 percent in 2022 compared to 2021, while the new construction market grew 84 percent, largely due to a large number of new projects and available inventory.

A list of upcoming mid-level projects in the UAE:

• Samana Ivy Gardens.Ivy Gardens is the first environmentally and economically sustainable residential development from Dubai-based Samana Developer. The project will cost AED 350 million and will have heat resistance, energy efficiency and the ability to recycle gray water. Ivy Gardens will be located in Dubailand, will cover 300,000 square feet and will feature 348 apartments, including studios, one, two and three-bedroom units, each with its own swimming pool. Other amenities include a fitness club, indoor and outdoor gym, sauna and steam room, large swimming pool, parking with valet service, barbecue area, children's playground and outdoor movie theater.
• Westwood Grande II.Due to the success of the first phase of Westwood Grande at 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 equipped with smart-home technology. Other benefits include a rooftop swimming pool, gym, landscaped gardens and children's play areas.
• Aljada.Arada's Aljada development project in Sharjah continues to make progress. It is the largest mixed-use development in the emirate's history, comprising 25,000 homes, most of which are apartments. So far, Arada has sold 9,000 homes and completed 6,300. Arada plans to complete 2,500 homes in Aljada in 2023 and launch several new projects. One of the most ambitious projects is a new neighborhood scheduled to launch by the end of the first quarter. Aljada's AED 24 billion master plan includes serviced apartments, kindergartens, four schools, polyclinics and two health centers, four mosques, a bike path, two post offices, a public library, a civil defense center and a municipality.
• Bloom Living.As part of Bloom Living, Abu Dhabi-based Bloom Holding is set to unveil several mid-range projects in the near future. Bloom Living is divided into three phases, Cordoba, Toledo and Casares, to be completed by the fourth quarter of 2024, the second quarter of 2025 and the first quarter of 2026, respectively. The projects offer townhouses and two- and three-bedroom apartments, as well as studios, one-, two-, three- and four-bedroom apartments. Cordoba, scheduled for completion this year, sold out within four hours of going on sale. All townhomes in Toledo are also sold out. Bloom launched the third phase of Casares in May 2023.

Future Trends.“The UAEreal estate market is in an exceptionally strong position at present, thanks to near-perfect demand from investors and end-users, driven by wise government regulatory policies and a favorable geopolitical environment,” says Arada Group CEO Ahmed Alkhoshaybi. “Developers, retrofitting and renovating existing buildings and creating c