Investors in Downtown Dubai have some thinking to do

Dubai, a city of world-class superstructures and futuristic dreams, has stretched the boundaries of human imagination ... time and again. Its luxury properties have now become an integral part of the landscape. The city is estimated to have more than 900 high-rise buildings, including close to 400 skyscrapers.

Downtown Dubai, once a desert landscape, has evolved into one of the finest and most prestigious locations in the UAE and the region. Properties in the area are definitely higher up in the pecking order on an investor’s checklist. Home to the world’s tallest tower and the largest shopping mall, Downtown Dubai has truly acted as a magnet for international investors.

With aesthetically designed residential towers, commercial precincts, and infinite leisure and retail options, the area has witnessed a significant rise in residential and commercial activity. As the city continues to develop and expand into a top tourism destination and financial hub, Downtown Dubai looks set to receive a plethora of luxurious projects.

Last year was one of the most active for Downtown Dubai. Over the years, the area has witnessed a substantial rise in prices as well as transaction activity. This should not be taken as a surprise because as the economy progressed, substantial investments flowed in.

However, Dubai has started to witness a slowdown in transactions in recent months primarily due to the decline in oil prices. This has impacted overall liquidity, which drives financing activity in the real estate sector. It has affected the demand from Russian and Saudi investors, who have seen a massive dip in their asset value due to the global oil situation.

The strong dollar has also made property slightly expensive for investors from Asia and Europe.

Dwindling transactions

This has also had an impact on Downtown Dubai ... transaction activity has reduced in terms of both value and volume. Total value of cash transactions between January to May amounted to Dh1.2 billion compared with Dh1.7 billion for the same period last year, while number of transactions dwindled to 280 compared to 565.

Palm Jumeirah on the other hand recorded an increase in the value of transactions to Dh1.9 billion from Dh1.7 billion in 2014, while transactions reduced slightly to 301 from 320 in 2014.

The centrepiece of Downtown Dubai, the iconic Burj Khalifa as the tallest tower, is also under threat by a development in Saudi Arabia which is to open its doors in 2019. Another key question on the investor’s mind is with respect to new projects launched in the area, with most completions due in 2016 and 2017.

The locality is set to receive more than a dozen luxury residential projects. As supply gradually increases, existing developments in the surroundings will begin to see some impact.

The overall concept of experiencing luxury is also being looked at by other developers, including Nakheel which has announced new retail and leisure additions to its flagship Palm Jumeirah. “The World’ which complements the Palm is another high-end project and will offer investors/end-users a different dimension to luxury.

So what is playing on the minds of the investors who have properties in the Downtown area? Existing investors have been concerned about the increasing supply, expected to be approximately 5,000 units and nearly doubling its current supply.

The main sources of demand are international investors. However, with tightening of regulations in main source markets such as India, it remains to be seen if demand would catch up with supply.



Source: Robin Teh, Special To Gulf News

The writer is the Country Manager — UAE, Chestertons Mena.


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