A spate of visa reforms has seen professionals and retirees from several parts of the world make Dubai their second home in recent months. The United Kingdom is among the main countries whose nationals have taken advantage of a sweet spot in property prices, a relaxed visa regime and surging investor and end-user confidence to buy a home in the emirate.

Dubai-based property broker Betterhomes says UK buyers “flooded” Dubai’s residential real estate market in the first half of this year as the buying and selling of Dubai homes hit a 10-year high. “The number of buyers from the UK increased significantly, jumping from 10th place in H1 2020 to second place in H1 2021,” the broker said in its Dubai property market report for the first half of the year.

UK nationals were second only to traditional leaders Indians in the first six months of the year. “Whether buying a home, holiday home or property investment, UK buyers seized the opportunity to purchase properties while the prices are still growing,” the report said. “These buyers are mostly expats living in the country, highly motivated by low-interest rates, optimistic business sentiment, and an active job market in the UAE,” it elaborated.

The increase in the number of UK nationals buying homes in Dubai can be attributed to several factors, including the golden visa scheme and business reforms. Betterhomes alone saw a 600 per cent jump in the number of Britons buying Dubai homes through its services in the first six months of the year. The report also showed a substantial increase in the number of buyers from other European countries. The trend continued throughout H1 2021, the broker said.

The surge in inquiries for villas for rent and sale began last year during the lockdown. People realised the need for additional space for everyday life at home

“Domestically, low-interest rates and improving job sentiment, coupled with a focus on the ‘home’ brought on by the pandemic, have led to a surge in demand from residents,” said Richard Waind, Group Managing Director, Betterhomes. “Internationally, Dubai’s Covid-19 response and business-friendly approach have won many admirers. As a result, investors have returned in large numbers, looking to take advantage of both improving capital growth prospects and attractive rental yields, which remain higher than most established markets,” said Waind.

As transactions hit a high, it was business as usual for Dubai’s ultra-luxury homes, the broker said. “The most notable change was in the value of transactions, which was much higher compared to H1 2020, reflecting the demand for massive luxury properties. The value of the properties sold in Dubai increased by 92 per cent in H1 2021 and continues to grow from quarter to quarter,” the report noted.

The luxury segment over Dh10 million has enjoyed a record period as high-net-worth individuals, many from Europe and driven by concerns over the fiscal response to Covid-19 bailouts, look to settle in Dubai

Richard Waind, Group MD, Betterhomes

Transactions in the villa communities saw the highest growth in H1, it said. “The surge in inquiries for villas for rent and sale began last year during the lockdown. People realised the need for additional space for everyday life at home. Juggling work, leisure, and recreation while raising children from an apartment proved to be the tipping point for many buyers and tenants,” said the report.

Data from the broker shows villa transactions increased by 167 per cent in the first six months of the year when compared with the same period of last year. Meanwhile, townhouse transactions increased by 97 per cent. A villa is an independent compound house complete with amenities while townhouses share common walls and are comparatively smaller in size when compared with a villa.

I’ll be in the study downstairs

The same bigger-is-better trend was seen in apartments, too. “Buyers, especially end-users, started investing in bigger apartments with enough space for a home office, home gym, and other areas required since the pandemic. As a result, clients opted for 3-bed flats, resulting in a 24% increase in the average size of apartments sold,” said the broker.

Buyers, especially end-users, started investing in bigger apartments with enough space for a home office, home gym, and other areas required since the pandemic

“Since buyers started investing in bigger units, the average transaction price rose significantly higher in H1 2021,” it noted. The agency said it recorded a 40 per cent increase in the average transaction price. “There are several possible explanations for this outcome, but it most likely boils down to the fact that after the pandemic, people realised they required more space at home.”

Go play in the garden

With demand for home offices not going away anytime soon (there are reports that maintain that remote work is here to stay even after the pandemic is over), bigger homes were the flavour of the season among tenants, too. “As with sales, the desire for outside space and home offices has been a key driver for larger units. Three-bed apartments and villas were particularly in high demand,” said the report.

Bigger homes were the flavour of the season among tenants, too. As with sales, the desire for outside space and home offices was a key driver for more spacious homes

“Many villa communities experienced a sharp decline in rental supply this year as tenants competed to snap up available units, which has in turn pushed prices up,” it noted. This has started a virtuous cycle of higher sale prices as investors rush to that realise higher yields. “Rising rental prices in villas and townhouses have not gone unnoticed by investors. Since they typically have lower service charges than apartments, investors went for smaller villas and 2 or 3-bed townhouses with high rental demand and attractive yields,” the H1 report said.

After several quarters of decline, rental prices seem to have once again started their ascend, especially in low-supply, high-demand homes. “Rental prices of villas followed market trends and increased by 14 per cent, primarily due to a decline in the inventory in certain communities.”

That, however, doesn’t mean that it’s a landlord’s market (yet). Rent values of freely available smaller apartment units continue to be under pressure. “Meanwhile, rents slightly decreased for apartments by 4 per cent. Tenants still preferred four-cheque contracts (36 per cent), followed by one-cheque contracts (26 per cent), which hasn’t changed much over the last few quarters.”

Gazumping is, sadly, back

As market activity picks up pace, some of the ills associated with a ‘hot’ marketplace may be rearing their head once again. Among them is the practice of gazumping – when a seller accepts a verbal offer on the property from one potential buyer, but then accepts a higher offer from someone else. It can also refer to the seller raising the asking price or asking for more money at the last minute, after previously verbally agreeing to a lower one.

As market activity picks up pace, some of the ills associated with a ‘hot’ marketplace may be rearing their head once again

“Buyer activity has been particularly acute in the established villa communities where we have seen double-digit price rises in the first half of the year and the return of gazumping, much to the frustration of many,” said Waind.

“After six years of falling prices, it is difficult not to have sympathy with sellers now looking to maximise their sales. While prices remain well below previous highs, there remains lots of value for buyers. In this fast-paced, rising market, any prospective buyer needs their mortgage in place before starting their search and must be able to move quickly if they aren’t to miss out,” he said.

Thinking of buying a home in Dubai?

Experts expect prices to continue rising in the near term. “With the US Fed reserve indicating that interest rates will remain at their current low levels well into 2022 and the supply of new units peaking and expected to drop from next year, it is hard not to see prices continuing on an upward trajectory for the next couple of years,” said Waind.

In any mature market, there will be winner communities and there may be loser communities in terms of return on investment, and investors must do their own due diligence before making any investment decision.