Budget-conscious buyers shying away from higher-priced property locations
Tenants and prospective purchasers have started eyeing peripheral Dubai communities as prices in some of the emirate's more popular locations are moving out of reach for them, a new report says.
As prices move closer to and, in some case, beyond the pre-2008 levels, several interested buyers and investors are now actively looking at previously less popular areas, ignoring Dubai locations that have seen a substantial hike in property prices.
Investor interest has shifted to "peripheral communities such as Jumeirah Village, Dubai Sports City and Dubai Silicon Oasis, as many prospective purchasers remained priced out of the more popular areas of the city such as Downtown Dubai and Dubai Marina," according to the Asteco Dubai report.
John Stevens, Managing Director, Asteco, says that the most recent quarter has seen a decline in investor interest in the more established property locations in the emirate. "There was a decline in interest in the previously popular affordable communities of Discovery Gardens and International City, which only registered minimal growth, indicating that they are now topping out price-wise and any further growth will take them out of the affordable bracket," he said.
Stevens also noted that sellers who raised their prices following the Expo 2020 announcement last year are intent on maintaining their position, which has resulted in a reduction in transaction levels, especially for higher priced properties within established communities.
Read: Revealed: Dubai's top 5 cheapest and costliest areas to rent
The year 2014 has brought some good news for Dubai residents on the lookout to rent or buy homes. While 2013 saw rents and property process rise at a breakneck pace, 2014 so far has been a year of stabilisation and consolidation.
Of course property prices, and along with them the rents we pay, are still edging up, but they're no longer surging as fast as they were last year. The Asteco report maintains that Dubai witnessed marginal rental growth, up 6 and 3 per cent, respectively, for apartments and villas in the second quarter of 2014.
Indeed, lease and sale prices in the more popular Dubai communities have surged by up to 60 per cent in 12 months, or since the second quarter of last year. Apartment prices in Dubai Marina and Downtown Dubai have surged the most since last year, up year-on-year by 62 and 52 per cent, respectively, the report states.
The top performers in the most recent quarter were Downtown Dubai and Jumeirah Beach Residence, both up by 11 per cent to Dh3,300 and Dh2,000 per square foot, respectively, it adds.
Data shows that Jumeirah Village witnessed 46 per cent year-on-year growth with an increase of Dh300 to touch Dh1,100 per square foot. In comparison, properties in Dubai Silicon Oasis and Dubai Sports City are currently changing hands for Dh800 per square foot, and are among the more affordable ones in Dubai.
The communities leading villa sales were Victory Heights and Palm Jumeirah, with an 8 per cent and more moderate 3 per cent increase, taking the per square foot sales price to a ceiling of Dh1,450 and Dh4,000 respectively.
Palm Jumeirah recorded a 55 per cent increase over the last 12 months while the newer Al Furjan community jumped by 44 per cent with properties now selling at Dh1,200 per square foot.
A raft of recent new launches, including Dubai Properties Group projects such as Manazel Al Khor in Culture Village, Rahat Villas at Mudon, and 200 new units at Remraam, have joined a growing list of announcements with Damac also launching its NAIA Hotel and Hotel Apartments, 34 premium Fendi Villas at Akoya Drive, and two hotel apartments at Jumeirah Village.
Emaar also continued its string of new launches with Opera Grand, the first residential development in the Opera District at Downtown Dubai, and Danube's inaugural UAE project, the 171-townhouse Dreamz community at Al Furjan.
But for those expecting a continuation of this trend in the ongoing quarter, Asteco says it "anticipates renewed interest and activity in Q3 2014" on the back of new launches.
"We anticipate that post the summer months, there are likely to be several new project announcements that will test demand in the market, giving buyers new opportunities to invest," said Asteco's Stevens.
The company says that Dubai's rental market was dominated largely by demand from new arrivals, with apartment rates increasing by 4 per cent in Q2 and villas by 5 per cent with modest growth of up to 10 per cent witnessed across Dubai.
"With rents increasing steadily since 2013, many existing tenants have elected to remain where they are and absorb the rent increase, as indicated by the Rera rental index, rather than start from scratch and incur the cost of moving, agent commissions etc.," said Stevens.
Read: How tenants are using Rera index to beat surging Dubai rents
Apartment rental rates grew most during Q2 2014 in Jumeirah Beach Residence where the annual rental rate for a two-bedroom unit increased by 10 per cent boosted by the release of the Al Bateen Residences.
International City recorded the highest annual growth at 66 per cent with a two-bedroom apartment currently leasing for up to Dh70,000 while Jumeirah Lakes Towers rose by 54 per cent year-on-year, to reach Dh150,000 for a two bedroom apartment.
Villa rental rates grew by 5 per cent, on average, in Q2 with the popular Jumeirah location witnessing the highest growth of 12 per cent (40 per cent year-on-year).
Jumeirah Village saw an 11 per cent increase in Q2 (20 per cent year-on-year) due to its affordable positioning, with a three-bedroom townhouse typically achieving rates from Dh155,000 to Dh185,000 per annum.
Compared with Q1 2014, office leasing in Dubai was relatively slow in Q2, with Dubai Investment Park and Dubai Internet City the areas most in demand, with an overall market average rental rate increase of just 2 per cent.
Office sales flat-lined in Q2, however, a major transaction was concluded by Dubai's first real estate investment trust, (REIT) with the AED 600 million-plus purchase of more than 15 vacant office floors in Index Tower, at DIFC.
Asteco predicts an increase in enquiries and transactions post summer, supported by ongoing economic improvements and activity on the part of companies budgeting for the year ahead, and those expanding or relocating and in the market.
"We expect the main beneficiaries of this increase in demand to be the quality single-owned office buildings in prime business locations such as DIFC, Sheikh Zayed Road and Dubai Media & Internet City," noted Stevens.
© Emirates 24|7 2014
