The novel coronavirus (COVID-19) pandemic is taking a major toll on the real estate market in the UAE.
A report published by Standard & Poor's Global Ratings in February found that the outbreak could see Dubai's property prices fall "to levels last seen ten years ago."
"We believe real estate prices are approaching levels seen at the bottom of the last cycle in 2010, and are even lower on an inflation-adjusted basis and considering sales incentives for off-plan property," the report stated.
The contagion has continued to spread in the Gulf nation since the report was first released. This will now further impact the already-struggling local real estate market. On Sunday, the UAE announced 102 new COVID-19 infections, bringing up the total number in the country to 570.
Amid the increase in the number of cases, local officials are set to roll out stricter measures in a bid to slow down the rates of infection. These might include ordering the complete suspension of work at construction sites and halting ongoing projects. This will, in turn, lead to major delays in delivering properties that are currently under the works.
The S&P report warns that any similar delays "would increase working capital funding gaps for developers, including Emaar Properties and Damac Real Estate."
COVID-19's impact is the last thing the real estate industry in Dubai needs at this point. After all, the local property market saw major drops last year and has generally been declining in the past decade.
The fall in the industry's growth seemed to slow down a little thanks to Expo 2020 Dubai. Other factors also played a role in helping the sector improve. However, the recent ongoings are reversing all these positive leaps.
Will Dubai's real estate market boom post-COVID-19?
Not all the news surrounding the emirate's real estate market has been negative amid the viral outbreak.
Last week, Richard Waind, group managing director at Better Homes real estate company, said it was highly possible for the UAE to witness a "buying boom" when the current pandemic comes to an end.
Though the UAE-based company's sales slowed down due to COVID-19, Waind explained that there were still many buyers interested in local real estate.
"Once this is over I expect we will have a buyer boom as everyone wants to take advantage of those factors (interest rates and lower deposit) and at that stage demand will spike and prices will start to go up," he added.
Real estate markets are expected to suffer losses across the GCC
The ongoing viral outbreak is also affecting economies and real estate markets all over the Gulf region.
The uncertainty it's causing is leading thousands of locals to postpone or cancel on deals. The Gulf's huge expat community is also scaling back when it comes to investing in any long-term purchase at the time being. This is because so many of them don't know whether they will be able to keep their jobs at a time when regional companies affected by COVID-19 are laying-off workers or giving them unpaid leaves.
In Saudi Arabia, the real estate market is set to take a major hit due to the fact that the sector was partly relying on the growth of tourism and entertainment in order to expand. Both these sectors have come to a halt in the kingdom in the wake of the novel coronavirus spread.
Kuwait and Bahrain are also expected to see real estate markets dwindle as COVID-19 hammers local economies across the region, where people are worried about a coronavirus-induced recession and further market collapses.
Despite that, experts believe that avid real estate buyers will move forward in purchasing properties due to the fact that the ongoing crisis has already led to major drops in prices and interest rates.