Article

Villas versus apartments in Dubai

19 Aug 2020

By Dima Isshak

Villas versus apartments in Dubai

Middle East Blog

Explore More

We asked our CBRE residential specialist how villas are performing against apartments in Dubai, and the effects of COVID-19.

How are villas performing against apartments?
In general, what we are witnessing across the market is that there is an increase in searches for villas and townhouses, particularly those featuring pools and gardens. This shift is driven by a number of different of factors. Stay-at-home measures have forced residents to re-evaluate their living spaces and look at the places they live more closely as they spent more time indoors. With rental rates also coming down across the market, residents are in many cases also able to afford larger, more spacious units. Despite this increase in interest, however, actual transactions supporting this trend are still lagging, due to the general length of purchase decisions and processes.

What is the current change in the demand for villas compared to last year
The number of villa and townhouse transactions as per DLD for the period from January to July 2020 registered at nearly 3,500 transactions vs 4,400 transactions during the same period in 2019, equating to a decline of approximately 21%.

Which areas and projects have seen a rise in inquiries and demand for villas?
As per DLD transactions registered during July 2020, the top 5 developments with highest volume of transactions were:

  • Dubai Hills Estate
  • Emirates Living
  • Al Furjan
  • Dubai South
  • Town Square

The total transaction numbers in those areas accounted for nearly 32% of the total villa and townhouse transactions in July 2020.
During the period from January to July 2020, these areas had registered nearly 1,000 villa and townhouse transactions compared to close to 1,600 transactions for the same period in the previous year, equating to approximately 35% decline.  While there may be a slight increase in interest for villas and townhouses, the registered transactions are likely to experience a delay reflecting this trend, as purchasing decisions and general process typically span a relatively lengthy period.

Has COVID-19 changed demand?
Stay-at-home measures and enforced lockdowns as a response to COVID-19 have begun to re-shape end-user behaviour and preferences when it comes to their homes.  There is an increased consideration for private amenities which allow occupiers to be more in touch with the outdoors and have access to sunlight and fresh air on-demand within the comfort of home and while maintaining the safe physical distancing.  Additionally, residents are expected to seek out housing options which offer extra space to set up a home office, home gym or play area for children.  On the other hand, and specifically with respect to residential purchases, with household income contraction and job uncertainty in some cases, purchasing decisions are likely to be a drawn-out process during this time.

What is the supply and demand situation for villas and townhouse?
As per our CBRE database, there are approximately 61,000 completed villa / townhouse units to date, of which 6,700 units have been delivered in 2020.  As per our supply tracker there are nearly 14,500 villa/townhouse units currently under construction and are expected to be delivered between the remainder of the year 2020 to 2022.  Nevertheless, there is likely to be some potential delays in project deliveries as a result of COVID-19 and wider macroeconomic impacts.
On average during the period of 2020 to 2022, approximately 7,000 villa/townhouse units are expected to be delivered per year compared to around 5,000 units per year for the period of 2017 to 2019, highlighting the significant uptick in supply which is expected within this product category. Among new supply deliveries, key areas of growth include Dubai Hills Estate, Dubai Land and Dubai South

Is the current rise in interest for villas presenting any kind of dilemma for developers?
Developers will need to have additional consideration for individual unit design and layouts to accommodate the demand for additional and versatile space, driven by evolving preferences for flexible working beyond COVID-19.  There is also likely to be a stronger focus on the open space, green areas and community facilities offered within a villa/townhouse communities as occupiers shift to greater utilization of and preference for this space and additional amenities.

What is the delivery pipeline for 2020?
As per our supply tracker there are nearly 14,500 villa/townhouse units currently under construction and are expected to be delivered between the remainder of the year 2020 to 2022.  The total expected villa/townhouse units represent 14% of total residential supply expected during this period which is in line with previous years supply delivery.

What are the key villa projects?

  • Dubai Hills Estate, Emaar: approximately 7,400 villa/townhouse units (total includes units completed and under construction)
  • Town Square, Nshama: approx. 2,700 villa/townhouse units (total includes units completed and under construction)
  • Emaar South, Emaar: approx. 2,300 villa/townhouse units (total includes units completed and under construction)

What are the sales prices for villas in the top 5 locations?

  • Average sales prices for the top 5 locations with the highest transaction volumes in July 2020:
    • Dubai Hills Estate: AED 965/sqft
    • Emirates Living: AED 855/sqft
    • Al Furjan: AED 580/sqft
    • Dubai South: 580/sqft
    • Town Square: 550/sqft

  • Average sales prices have declined between 5% to 20% across the various villa/townhouse developments compared to the same period last year (July 2019), with rental rates experiencing a similar decline during the same period.