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Real estate developers in the UAE follow the global pattern of determining the cost of a property primarily based on its location and architectural design. But there are several other factors as well.
Transport infrastructure and other amenities like schools and shopping options also play a big role in driving up the prices of properties. Dubai Marina, for instance, has emerged as one of the most sought-after residential addresses attracting rental yields significantly higher than other areas. According to Cluttons’ industry trends, the property costs in Dubai Marina have increased by 28 per cent since 2010, thanks to its connectivity to the Dubai Metro and Dubai Tram, and its proximity to various retail offerings. The Roads and Transport Authority (RTA) has claimed that the value of properties situated within 1.5 kilometres of metro stations have risen by 13 per cent to 41 per cent.
The presence of community malls also prop up prices of an area. In the next five years, Dubai is expected to have 20 new community malls, with seven of these located in the new residential clusters near the Expo 2020 site and Jebel Ali. In Abu Dhabi, Saadiyat Island, Reem Island and Al Maryah Island will also see mall additions.
The costs of land parcels available to developers play a big role in determining project costs. Plots along the Shaikh Mohammad bin Zayed Road are available for Dh120-Dh140 per square foot, with areas near the Expo 2020 site available at Dh150 per square foot. In Dubai Silicon Oasis, land is valued at around Dh180 per square foot. The Downtown area, which carries an upmarket tag and is well-known for its impressive transport infrastructure and amenities, fetches a price of Dh250-Dh300. A residential plot in Business Bay, yet another developed cluster, is estimated to be between Dh350 and Dh550 a square foot while Dubailand attracts a price of Dh75-Dh150.
Other than land, the rise and fall in prices of construction materials likewise affect the price of a property. Two major raw materials in the construction industry are steel and cement. While cement accounts for 3-7 per cent of construction costs, steel prices can have a telling effect on the price line, accounting for around 10-15 per cent of the building expenditure. According to experts, both these commodities are expected to remain stable in the next one year which means construction costs will not witness any major rise.
• Property owners and occupiers flock Dubai Marina for its beachside lifestyle
• Land costs, and cement and steel prices have impact on construction costs
• Transport links, malls, schools and leisure facilities prop up property prices
Source: S. Dhar, Special to Properties
The writer is a freelancer