With freehold transactions falling by almost one third in total during the third quarter of the year, Dubai’s off-plan residential sales market is still buoyant and continues to attract regional and international investors, a report said.

The off plan residential sales market In Dubai has retained its momentum, despite the stagnation in capital value growth with investors taking a longer term view of the market, according to latest research released by international real estate consultancy Cluttons.

Cluttons Dubai Winter 2014 Residential Market Outlook report also highlights that investment appetite continues to remain strong, with investors keen to free up capital to move on to their next purchase.

Steve Morgan, chief executive of Cluttons, Middle East: “Many households that are determined to purchase, now view off-plan properties, as good value. For instance, at Villa Lantana, just off the Umm Suqeim Road, there has been a high level of appetite from Emirati (43 per cent) and Indian (24 per cent) investors in particular, with the former group primarily comprised of buy-to-let investors.”

Cluttons’ international research and business development manager Faisal Durrani said: “Positively, we are seeing nearly four out of every five transactions being refinanced once buyers have met developer restrictions, if any, on the transfer of title deeds. While the market continues to adjust to the changes in the financing landscape, we expect the gradual softening in values to persist over the next three to six months while the market adjusts to the evolving conditions.”

“Emaar for example, has reportedly restricted re-sales until handover of its first tower at Dubai Creek Harbour, which is expected to come to market in 2018. Units sold for between Dh1,400  per sq ft ($381) and Dh1,850 ($504) per sq ft, with 30 per cent down payments and Emaar has reported 100 per cent sales. Certainly, Emaar’s positive reputation has aided the rapid sales, but the sell-out scheme also highlights the maturing attitude of investors who are taking a long term investment perspective,” Durrani continued.

Significant improvements to Dubai’s infrastructure are also set to bolster long term capital value growth across the city. In Dubai Marina, for instance, investors are already actively seeking to acquire properties in close proximity to the Marina’s Metro stations, The Beach, and Jumeirah Beach Residence and it is expected that the Dubai Tram stations dotted around the Marina will similarly drive demand up in their immediate vicinity as the importance of being close to a public transport node grows.

Cluttons latest research also shows that, one year after the introduction of the Federal Mortgage Cap, the market is now showing signs of succumbing to deposit requirements imposed on buyers, and is entering an anticipated period of more measured and sustainable expansion. During the third quarter (Q3) of 2014, the rate of house price growth slipped by -0.3 per cent, marking the first decline since Q1 2011.

Average values are still however 10 per cent up on Q3 2013 and currently stand at Dh1,493  per sq ft. Apartments gained a 0.4 per cent rise in average prices, while villa values decreased by -1.2 per cent during Q3.

Morgan continued: “The government’s introduction of the Federal Mortgage Cap and  increase in property registration fees, has reined in the extraordinary growth seen in the market over the past 24 months, and has been exceptionally effective, culminating in the IMF recently backing down from concerns about the market overheating.”

According to the report, the rental market has also come full circle as it enters the final phase of the current property cycle, with average rents across Dubai’s freehold areas dropping by -0.4 per cent during Q3. Average rental values however remain nearly 5 per cent up on Q3 2013.

Despite the cooling of rents, tenant demand remains exceptionally strong, underpinned by the rapid economic expansion and the subsequent rise in the level of jobs being created across the city.

“In particular, the leisure, hospitality, aviation, finance, banking and real estate sectors have seen rapid expansion, as evidenced by the level of housing requirements from these sectors. In the short to medium term, we do not anticipate a slowdown in the rate of job creation, which suggests that the current period of rental stagnation is likely to be short lived. Furthermore, supply is projected to fall well short of demand in the villa segment of the market in the medium to long term.” Durrani concluded. – TradeArabia News Service