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While purchasing a property has become more appealing with the ongoing downward pressure on property values, real estate developers are making it even more tempting by enticing them with attractive payment schemes for off-plan projects. Many residents who were forced to forego plans to purchase a home because of various hindrances, such as more stringent mortgage cap regulations, are now reconsidering their buying plans.
Buying a villa is particularly gaining strong interest again, according to Adrian Popica, Manager of Green Community Residential Sales and Leasing at Better Homes. He explains that expatriates in the Middle East tend to live with their families, which makes houses with extra bedrooms, a garden and some privacy more appealing.
The villa segment has generally enjoyed a correction between 8-15 per cent year-on-year, according to Robin Teh, Country Manager of Chestertons UAE. “This is partly due to the current price trend and also due to future supply that the segment is expected to see once projects such as Jumierah Park, Villa Lantana, MBR City and Arabian Ranches [phase two] are completed. The supply could potentially double by 2020, thus, we expect residents to move out from older communities to newer [ones] as they are completed,” he says.
However, there has been a decline in the value of villa transactions from Dh3.4 billion in the third quarter of 2014 to Dh1.7 billion in the same period last year. The says this is mainly due to a general drop in the prices, coupled with low investor demand for secondary market properties in villa segment.
In 2015, about 2,000 villas were expected to be added to the current inventory, including Casa in Arabian Ranches phase two, which added 250 villas, and Mudon, which added around 250 town houses, says Popica.
“This year looks even more promising with an estimated 4,000 villas to be added to the current inventory,” says Popica. “In 2013-14, [there were] a great number of villa projects launched to keep up with the increasing demand and most of them will be delivered in 2016. Akoya, Reem and Living Legends are just a few of the projects that will have some completed phases by 2016.”
In general there are a lot more villas coming into the market than the demand, which is driving both prices and rents down. Popica says the correction in villa sales prices that started in late 2014 continued throughout last year, with prices in some areas falling by up to 20 per cent.
This has allowed many expatriates who were affected by new government regulations that capped mortgages at 75 per cent to enter the market again, which Popica says is a sign of a stabilising market. Prior to the price correction, many families that wanted to buy villas were forced to look for more affordable options and often end up purchasing an apartment. From 2012-13, there was roughly equal demand for villas and apartments, but by 2014 the trend shifted towards apartments, says Popica.
This year, the villa segment is again gaining traction because of attractive prices. Teh says developers are building compact homes with a more practical layout, allowing them to build on smaller plots and reduce the built-up area, while optimising the use of space. He further notes that developers are now studying the market thoroughly to target various market segments, particularly those living in apartments who are looking for villas. New projects such as Jumeirah Village Circle, Town Square and Falcon City are trying to capture this segment, he says.
When it comes to leasing a villa, Popica notes that well-established communities are preferred by families and demand remains strong in these zones.
“In the upcoming communities, properties tend to take a little longer to rent out because the access ways and facilities are not fully completed. However, these communities are very attractive for tenants moving out of apartments and are a more affordable option than the well-established communities,” says Popica.
High-end villa properties continue to charm niche buyers, as luxury living seems to never go out of style in Dubai. “The Wall Street Journal’s newly started property portal Mansion Global has recently ranked Dubai as the eighth top destination in the world for luxury property,” says Sanjay Chimnani, Managing Director of Raine and Horne Dubai. “The website lists and focuses only on exotic homes that are valued at $1 million [Dh3.67 million] and above. The high-end portal has selected 10 cities in the world.”
Most luxury villa buyers are interested in buying a second home in Dubai. Chimnani says high-end villas valued at Dh8 million-Dh10 million are the most sought-after properties for affluent property buyers looking for trophy assets and holiday homes. He believes this segment will continue to perform well in the future.
Moreover, Chimnani says three- and four-bedroom villas with prices of about Dh4.5 million-Dh6 million are witnessing strong supply inflow, creating a price softening in the segment. Apart from the high volume of supply, these villas also have to compete with upscale three- and four-bedroom condo units.
Comparison of a selection of villa communities in Dubai
Source: Hina Navin, Special to Property Weekly