Dubai residential property market seeing a broad based recovery, new report suggests
The residential property market in Dubai is experiencing a broad based recovery with prices and rental values picking up in several locations, according to a new report from Jones Lang LaSalle.
Secondary and more affordable locations in particular are seeing prices rise while primary locations are seeing a slower pace of growth, says the real estate advisory firm in its market report covering the second quarter of 2013. However, projects in newly developed areas are still lagging behind and it will be some time before they pick up.
The improvement comes at a time when the Dubai economy is expanding and the business outlook is strong. The report points out that Gross Domestic Product grew by 4.4% in 2012 and a Department of Economic Development and Business Confidence Index showed 91% of firms reporting either improvement or stability in business conditions.
Total residential stock in areas monitored by the firm stood at 360,000 units as of June 2013 and around 3,400 units, mostly apartments, were handed over in the second quarter of 2013.
The main completion in the last quarter was the much awaited Cayan Tower, also known as the Infinity Tower or Twisted Tower, in Dubai Marina which added 456 units to the residential market.
Other delivered projects included Phase One of Anantara Residences on Palm Jumeirah and a further 18,600 residential units are due to come to the market before the end of the year.
‘In reality it is likely that much of this supply will not be delivered by its scheduled data as some developers, especially ones with projects in areas with large upcoming supply, remain reluctant to launch some of their units,’ says the report.
By 2015 some 38,000 additional residential units are expected to be added to the market and some experts have concerns about the effect of a lot of new supply on rejuvenated prices.
However, the report says that most of the upcoming residential supply will be located outside of central Dubai in the south and east of the city. From 2013 to 2015 there is likely to be 5,800 units in Dubai Land, 4,000 units in Dubai Sports City, 3,600 units in Business Bay, 2,800 in Dubai Marina, and 2,500 in Jumeirah Village.
The report does indicate that the growth in prices and rents might ease due to the high levels of future supply. Other factors that will affect growth include tenants relocating to cheaper locations, limited debt availability, and more mature market regulations.
The report points out that the latest REIDIN Residential Sales index was up 16% year on year but only 3% quarter on quarter. Apartments outperformed villas, up 17% and 12% respectively. But they both remain below their peak values from the third quarter of 2008 with villas down 17% and apartments down 19%.
The REIDIN rent index increased 12% year on year and 3% quarter on quarter. The villa rent index was up 13% year on year and achieved its peak value in May 2013 while the apartment index was up 12% year on year but is 24% lower than January 2009.
‘Following the recent rises in rental values some tenants have started to consider the most affordable secondary locations, a move that has resulted in a slower rental growth in some well established areas,’ the report says.
‘Overall the residential market appears to be experiencing a broad based recovery in 2013 as prices and rents start to pick up in the affordable and secondary locations, sometimes at a higher pace than in the higher end areas,’ the report concludes.