Cluttons reports that consumer confidence may finally be returning to Dubai after a confusing and lackluster start to the year in the emirate’s residential real estate market. When compared over the last year, 2013’s first quarter saw prices increase in all property categories in Dubai, from low- to high-end real estate. The same could be said of the rental market as middle- and high-class units have also increased in price. Growth has also improved in both markets as the increased consumer confidence spurs developers into action, including many who stalled on projects that are now being revitalized. For more on this continue reading the following article from Property Wire.
A renewed confidence has burst onto the residential property market in Dubai with positive economic growth leading to new developments being announced and new buyers coming to the market place.
The start of 2013 was characterized by a period of confusion in the Dubai residential property market following the Central Bank announcement of a series of loan to value cap levels for expats and United Arab Emirate citizens applying for mortgages of 50% and 60% respectively.
But the bank is now in a period of consultation with the national banks and real estate experts Cluttons believes that renewed confidence is now appearing with fresh developments being announced and more buyers.
It believes that a ‘watered down’ version of December’s legislation may be implemented in coming months but it remains to be seen as to whether such measures will result in a move towards a market controlled by cash rich speculators.
However, renewed market confidence in Dubai had led to robust growth in nearly all sectors in the past six months, according to Cluttons, a firm that been working in the Middle East since 1976.
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Between the third quarter of 2012 and the first quarter of 2013, average prices for high end villas rose by 8.9%, while middle range villas have increased 14.9% over the same period. The lower budget end of the villa market registered the sharpest rise in values of 20.2%, although Cluttons points out that this was from a lower base than the rest of the villa market.
This trend has been mirrored in the apartment segment, where both high and middle range apartments have recorded average price increases of 10% each, while lower budget apartment units registered price growth of 14.6% over the same period.
Similarly, the rental market has also experienced substantial growth. High end villas recorded average rental value increases of 9.7% between the third quarter of 2012 and the first quarter 2013, while the middle range villa segment registered an average rent rise of 6.2%. Lower budget villas echoed the strong performance of the lower budget villa sales market, recording rental value growth of 19.6%.
Apartment rental values also followed a similar pattern, with the sharpest rise in rents recorded at the lower budget end of the market with a rise of 12.7%, followed by the middle range segment that grew 7.7%. The higher end of the market was the weakest performing segment at 6.4%.
Cluttons’ research suggests that rising rental values are driving tenants towards lower budget options, which have struggled over the past two to three years, with even more secondary and tertiary locations enjoying renewed activity.
‘We are buoyed by the renewed confidence in Dubai’s residential market and increased activity in the sector. This has naturally led to price rises, as much as 20% in one quarter. In many other developed markets this would be classed as a boom and it would be short sighted not to have some consideration to this. We welcome moves from the Central Bank to prevent the development of an overheated market and the likelihood of a bust scenario,’ said Steven Morgan, head of Cluttons UAE.
He also pointed out that transactional levels and improved confidence have clearly encouraged developers in the region. Nakheel announced the sales of 122 plots in Jumeirah Village Circle and Emaar announced and expansion of their Arabian Ranches development with a ‘Casa’ villa scheme.
On a larger scale, previously shelved projects have raised their heads again, including the announcement of a new Mohammed Bin Rashi City, a city within Dubai. Although a long way from fruition, this announcement clearly echoes an overall return confidence and a move away from the price collapses of 2009/2010.
Over the past six months positive economic activity driven from tourism and business has led to fresh property developments and confident property investment throughout the emirates.
Cluttons believes that Dubai’s strengthening property market is a reflection of the UAE’s improving economic performance. Dubai is expected to be a key driver in the predicted growth of the UAE economy of 4% in 2013. Dubai International Airport reported passenger numbers of over 57.8 million in 2012, paying testament to Dubai’s ideal location for global tourism and business.
This article was republished with permission from Property Wire.