More UAE homeowners expect property price rises in next 12 months

More homeowners in the UAE are forecasting an end to the years of residential real estate price declines compared to three months ago, according to new research.

Christopher Payne, chief economist at Peninsula, an investment and research company, said the coronavirus pandemic had taken its toll on the UAE market in the second quarter of 2020 but this might be slowly changing.

Peninsula’s Home Sentiment Survey, which measures consumer sentiment towards the residential property market at the end of Q3, showed that 50 percent of homeowners in the UAE expect prices to be stable or increase in the next 12 months, up from 41 percent at the end of Q2.

It also showed that 33 percent of UAE homeowners expressed their belief that home prices will increase in the next 12 months, up from only 11 percent of respondents in Q2.

“Assuming that our survey is accurately reflecting market perceptions, then we would assume that improving sentiment among homeowners reflects the view that things can only get better after Q2 lockdowns, that is that the economy has bottomed and so, therefore, has the real estate market,” said Payne.

“Indeed, this is not an unreasonable viewpoint given the economy will return to growth in 2021,” he added.

Payne cautioned against early optimism, however, pointing out that, overall, owners are not expecting price rises, only that a significant proportion of them have become more positive.

Fifty percent of homeowners still expect prices to fall in the next 12 months while 17 percent expect stability, according to the survey.

“Not surprisingly, given all that has happened in 2020, overall sentiment in the UAE still points towards declines in rents and home prices in the next 12 months,” said Payne.

“Of renters, 80 percent of respondents expect to renegotiate their rent lower when their lease expires. They are expecting a price decline, on average, of just shy of 10 percent,” he added.

“Overall, the interesting aspect about this survey is that sentiment is not positive but it is not as bad as it was three months ago,” said Payne.

Among other results in the survey is that more renters are now contemplating buying homes in the coming year than they were three months ago when the survey was last conducted.

Forty-eight percent of those surveyed in Q3 said they were less likely in the next 12 months to buy a home as compared to 63 percent in Q2.

Sentiment also continues to be better in Saudi Arabia and Egypt than in the UAE, according to the survey.

“Saudi’s residential market, particularly in Riyadh, rebounded strongly in the second half of 2019, on the back of better non-oil economic growth and a boom in the mortgage market. While sentiment has probably taken a hit from Covid, the majority of respondents in Saudi Arabia (59 percent) still reported expecting prices and rents to increase in the next 12 months,” the survey said.