Dubai property values 'reaching 2008 levels'
Dubai, August 26, 2013
Dubai property market is recovering at a rapid pace with the residential capital values rising by close to a third during the first half, while Sharjah too has benefitted from the demand spill from its neighbour with average rental rises of 7.1 per cent, said a report.
The heightened economic activity in Dubai has undoubtedly been supported by the recovery of the emirate’s real estate sector, with capital values in some residential submarkets quickly closing in on their 2008 third quarter pre-crisis peaks, stated top real estate expert Cluttons in its Summer 2013 report.
During the second quarter alone, the villa values rose by an average of 21 per cent, compared to 24.4 per cent last year. Apartments on the other hand recorded capital value increases of 25.1 per cent in the second quarter, almost double the corresponding 2012 figure of 13.4 per cent.
Overall however, the values remain -31.1 per cent below the previous peak suggesting that recent IMF concerns about the market overheating may prove too negative, the report stated.
The increased level of job creation is translating into upward pressure on house prices and rental values, which is illustrated by the fact that capital values have risen by close to a third during the first six months of 2013; however these still remain 31 per cent below the 2008 third quarter market peak.
According to Cluttons, both villas and apartments are seeing strong capital gains, with the latter having recorded price growth of 25 per cent in the second quarter alone, almost double the corresponding figure for 2012.
In the aftermath of the recession, prices plunged by -49.7 per cent, but now stand 36.9 per cent above the 2009 second quarter market low.
The drivers behind the price growth do not however mirror those seen during the market peak in 2008. Dubai has benefitted tremendously from the Arab Spring and its perception as a ‘safe haven’ for refugee funds from the broader Middle East region, said the report.
Furthermore, there has been a rise in domestic demand, fuelled in part by favourable lending rates, which are encouraging a greater number of buyers to step into the market and also by the soaring rents, which are driving some tenants to consider the option of home ownership as a way to avoid being caught out by rising accommodation costs.
As the pace of job creation accelerates, there is a marked increase in tenants seeking accommodation, particularly in well-established submarkets in New Dubai. The surging demand so far this year has helped to push rental values up by 11.3 per cent across Dubai during the first six months of 2013.
Steve Morgan, the head of Cluttons Middle East, said: "The resounding success of Dubai residential so far this year should not come as a surprise given the magnitude of the correction recorded during the bottom of the market; we are still far off the previous peak, when growth was far more unsustainable."
"The acceleration in residential capital values this year has been underpinned by robust levels of job creation and a rising population, rather than being fuelled by ‘fly-buy’ dealers, as was the case in the past. We are yet to see a definite solution on the matter, although this is less concerning than in 2008, given the increased number of end-users in the market," he added.
Across the border, Sharjah’s residential market, whose successes are closely linked to Dubai’s, has seen a rise in rental values in submarkets closest to Dubai, such as Al Nadha and Al Majaz, said Cluttons in its review on the neighbouring emirate.
The demand spill-over phenomenon seen in the last property cycle is now being repeated and the recent introduction of a Salik Toll Gate on the Al Ittihad Road and the removal of the daily Dh24 ($6.5) Salik cap does not appear to have dented the appetite to live in Sharjah and commute to Dubai for work, it stated.
This demand has translated into a rental value increase of close to 7.1 per cent across the emirate during the second quarter, which continues to remain popular due to the relative affordability of rents, the report added.-TradeArabia News Service