In 2020, the real estate market in the GCC suffered quite the blow as most projects were temporarily halted to deal with the Covid-19 pandemic. This stoppage of new projects caused quite the steep decline of prices as well as in rent of real estate across the Gulf nations. However, it seems that there’s light at the end of the tunnel for the housing market in 2021.
I have been hearing from different real estate developers and experts working in the region that they are considering a freeze on new real estate housing projects to reduce the supply gut and rebalance the market. I believe that this move will actually lead to a more stable and slow pace to balance out the fall in the price of both renting and buying.
For example, Dubai, to try and limit the gains of the private sector and balance out the semi-government property companies earnings, formed a higher committee for real estate in 2019 to help rebalance a market where concerns of oversupply have pushed prices lower in the last couple of years. Subsequently, several government related entities decided to stop new developments almost a year back, but Covid-19 definitely put the brakes on.
The market became fair game in 2020 where most sellers decided to halt on the sales of their properties in this unstable economy to make sure they sell at a higher price later on. Add to that that most tenants who suffered from salary cuts or even unemployment had to move to more affordable residences as most people downsized and the GCC clearly saw a high percentage of expats choosing to go back home which vacated even more residences.
According to my calculations and estimations , sale transactions in the GCC from January-October 2020 declined with a total value that receded by 4% from $75.5 billion to $72.1 billion with 52% of the value estimated to the Saudi market who was able to stay stable. Kuwait took the lead with an important residential rental fall estimated at 15%, followed by Dubai at 13% and Abu Dhabi at 7%.
However, the average value per transaction in the GCC increased by 7.6% to around $166,105 from around $154,365 in the same period in 2019. The number of GCC-wide transactions until October fell by around 11% to 434,158. The lower year-on-year transaction volumes and value transacted was largely due to the impact of Covid-19 on real estate demand and its various sub-segments like housing, commercial outlets and offices.
However, with most GCC countries being proactive towards the administration of the vaccine and following all safety regulations to stop the spread of Covid-19 and its newest variants, one can be hopeful that within the next few months, the Gulf region will start its path towards financial recovery.
Hamad Al Wazzan