Asteco has released its report for the fourth quarter of 2022 for the UAE's real estate market. According to the report which looks at transactions and trends in the last quarter of 2022, the UAE has demonstrated an impressive level of resilience in the aftermath of the COVID pandemic in 2022. The economic recovery, aided by higher oil prices and a revival in tourism and trade, resulted in a significant increase in inward investment, which led to record transactional figures. Advanced business reforms and government initiatives, such as the Golden Visa and efforts to transition to a digital-driven economy, are set to benefit the real estate market in 2023.

2022 Highlights:

The report indicated that the UAE’s economy continues to demonstrate growth and resilience in a challenging global context and is cementing its status as a globally attractive destination for investments.

2022, which started on a high note with the successful conclusion of Expo 2020, recorded a significant number of successful and noteworthy project launches. A trend which accelerated towards the end of the year and one that is expected to continue into 2023. These launches reflect a renewed sense of optimism in the real estate market, initially buoyed by a strongly performing secondary market and further supported by a surge in off-plan transactional activity.

In addition to a general rise in demand from end-users and ‘traditional’ investors, 2022 also saw an unspecified but substantial amount of existing and new stock being converted into short-term rental homes. This could be seen as a direct consequence of the strong performance in the hospitality sector.

Abu Dhabi Residential and Office Market

The Abu Dhabi residential market recorded a delivery of approximately 8,500 residential units in 2022, spread across different areas of Abu Dhabi including Al Reem Island, Al Raha Beach and Saadiyat Island. In addition, several new projects and additional phases of previously announced developments were launched in 2022, located in Yas Island, Al Jubail Island, Al Reem Island and Saadiyat Island.

While apartment rental rates were relatively stable at the end of 2022, they recorded marginal annual increases of 1% to 2% across Abu Dhabi. However, it should be noted that lower quality buildings, particularly within Abu Dhabi City, continued to be under pressure with some having to revise their rents to compete with newer stock.

Villas and townhouses continued to achieve strong levels of demand, particularly within the well-developed villa communities located on Saadiyat and Yas Islands. Average villa rental rates increased by 4% over the year with some developments recording close to double-digit growth.

Though office rental rates were relatively stable in 2022, there was an increase in demand for new space, particularly in Grade A buildings.

Apartment and villa sales prices recorded annual growth rates of 4% on average, with some developments in Saadiyat Island and Al Raha Beach for example, increasing by 8% to 10%, compared to the same period in 2021.  

Prime villa communities continued to achieve high demand levels, with some recording close to 25% increases in sales prices since 2020. New off-plan villa projects, as well as completed villas continued to be well received with emphasis on the popular high-quality villa communities. The lack of such properties stimulated sales price growth in 2022.

Several developments that were previously put on hold are expected to restart in 2023. In addition, Asteco anticipates numerous projects, currently at various stages of planning, to be announced in 2023. Demand for good quality, well-located, and competitively priced off-plan projects will remain positive.

Dubai Residential and Office Market

In 2022, approximately, 31,000 residential units were delivered comprising 27,000 apartments and 4,000 villas. Although slightly lower than initially forecasted at the end of 2021 (33,500 units), it not only represents a significant volume, but is also rather impressive given global economic challenges and supply-chain disruptions.

Meanwhile, the commercial sector saw approximately 6,50,000 sq. ft. of new office space. 

In 2023 we expect to see the completion of over 47,500 residential dwellings and approximately 1.35 million sq. ft. of office space.

In addition to the newly completed supply, 2022 recorded a significant number of successful and noteworthy project launches, which accelerated towards the end of the year.

Average apartment, villa and office rental rates continued their upward trajectory in Q4 2022 with quarterly increases of 6%, 5% and 7%, respectively. Annual rental growth in the villa market remained substantial at 23%, while average apartment and office rental rates rose by 19%.

Following some noteworthy increments during the first 9 months of the year, particularly within the luxury segment, sales price growth for apartments, villas and offices slowed towards the end of 2022, increasing by an average of 3%, 3% and 4% in the final quarter. Annual sales price growth stood at 16%, 18% and 19%, respectively.

The new rental index, which is expected to be rolled out this year and which will be based on star ratings of each building reflecting quality and amenities, will encourage landlords to step up their management and maintenance efforts to maintain good occupancy and rental rates, particularly for more mature properties.

Al Ain and Northern Emirates Market

2022 looked promising with marginal rental rate increases across the Northern Emirates during the first 9 months of the year. Rates declined marginally in Q4 (between 1% and 4%), compared to the previous quarter. However, annual changes remained positive at 5% on average.

Rental rates in high-end apartment buildings in Ras Al Khaimah and Fujairah were more resilient and remained unchanged during the last three months. Sharjah apartment sales prices recorded quarterly and annual growth of 2% and 7% in Q4 2022.

The relocation trend experienced during 2022, where we saw increased tenant movement from older stock to new, better quality developments, is likely to continue in 2023 in line with increased availability of new quality supply in the Northern Emirates, as well as Dubai. Further sales price growth is expected in 2023 amidst a buoyant property market.

In Al Ain, apartment and villa rental rates remained more or less stable throughout 2022. Some declines were recorded in older compounds and private villas, which were offered at rates not aligned with the market.

On the supply side, a number of buildings and small villa communities, predominantly located in Town Center, Asharej, Zakher and Nehma, were handed over.

The office market showed demand increasing marginally, however rental rates remained stable.

In 2023, the Al Ain market is expected to remain stable across all asset classes.