Dubai residential market growth 'slows'
Dubai, April 9, 2014
Dubai’s residential sales market has slowed down to more moderate growth levels in the first quarter of 2014 following a spike in prices, after the Expo 2020 announcement at the end of last year, according to a report.
The average apartment and villa sales prices increased by 3 per cent and 6 per cent with average rental increases at 5 per cent and 3 per cent respectively, said the top regional real estate services firm Asteco in its 'Dubai report for Q1 2014.'
The demand for secondary residential areas increased from budget-conscious tenants and savvy ROI-focused investors, it added.
“There were significant increases in unit prices in fourth quarter following news of Dubai’s Expo 2020 win and we saw deals flounder as sellers with genuine offers decided to wait in anticipation of further growth. Transactions slowed down in established communities where surging prices went beyond what buyers were willing to pay,” remarked John Stevens, the managing director of Asteco.
“Now we are witnessing growth in secondary residential areas, which are attracting prospective purchasers looking for more sensible asking rates with potentially better growth potential,” he added.
The Asteco report also noted increased interest from potential investors in competitively priced off-plan developments offering attractive payment plans as many buyers are now faced with a higher cash requirement due to the recently enacted (and now enforced) law regulating Loan-to-Value (LTV) ratios to those applying for mortgages.
More than 3,000 units were launched in the first quarter and notable off-plan apartment projects include Mulberry Park Heights at the well-publicised Mohammed Bin Rashid City, Atria in Business Bay, Palm Tower Residences on Palm Jumeirah, and Celestia Serviced Apartments at Dubai World Central.
Villa launches capturing market attention included Yasmin and Rasha at Arabian Ranches, Mira Oasis at Reem and Trump Estates at Akoya.
According to Asteco, the DIFC apartments were the best performers in terms of percentage performance gains, rising by nine per cent in the first quarter with prices per square foot ranging from Dh1,800 to Dh2,300 ($490 to $626) due to the impending completion of quality stock.
Jumeirah Lakes Towers also saw healthy first quaarter growth of eight per cent, at Dh1,100 to Dh1,500 per square foot.
Villa sales price gains were led by moderately priced developments such as Al Furjan and Jumeirah Village, recording 22 per cent and 15 per cent Q1 growth respectively, with prices per square foot ranging from Dh1,000 to Dh1,200 and Dh850 to Dh1,100.
“We anticipate this trend to continue throughout 2014 but with more moderate sales price growth forecast for the second half of the year,” commented Stevens.
The Asteco report also flags concerns regarding unsustainable pricing in the residential leasing market where apartment and villa rates grew by 5 per cent and 3 per cent respectively in Q1.
“This continued rise in rents could herald the start of a flight to affordability for budget sensitive Dubai residents, who may well consider relocating to Sharjah, Ajman or further afield in the Northern Emirates,” he noted.
According to the Asteco report, the best performing rental areas in the first quarter of 2014 were International City (11 per cent), Jumeirah Lakes Towers (11 per cent) and Dubai Marina (10 per cent) where one-bedroom apartments are currently commanding annual rental rates of up to Dh50,000, Dh105,000 and Dh140,000 respectively.
The established family-friendly community, The Springs, topped the villa rental sector, up by 13 per cent in Q1 with a three-bedroom villa commanding Dh220,000 per annum.
Movement in the commercial market in Q1 was positive for both office sales prices and rental rates, which were up by 11 per cent and 8 per cent respectively buoyed by a stable economy and positive market sentiment, stated the property expert.
Business Bay outperformed the sector with a 23 per cent Q1 increase in per square foot sales prices climbing up to Dh1,400. Jumeirah Lakes Towers also performed well with 11 per cent growth and rates now ranging from Dh850-1,200 per square foot.
The Asteco report also noted a recurrent trend in the extension of office lease terms, often beyond five years, as tenants hedged their bets against future rental rate increases and negotiated extended lease agreements to protect initial capital expenditure.-TradeArabia News Service