Risks and returns of Dubai realty

The office market in Dubai sees a decline in tenant demand / Image Credit: Supplied.The office market in Dubai sees a decline in tenant demand / Image Credit: Supplied.

The latest Dubai Investment Outlook H1 2016 report from Core, UAE associate of Savills, reveals a stark contrast in fortunes for the emirate’s real estate sectors, with some expected to remain at the forefront, while a struggle is predicted for others. Winners include established prime residential; Grade A prime location offices; Grade A warehousing; mid-segment hotels and serviced apartments; and international curriculum schools. Losers are Grade B secondary location offices; affordable residential and the four and five-star hotel market.

David Godchaux, CEO, Core, UAE associate of Savills, said: “Different investors have different risk appetites. We have not compared the returns or risks of different investment sectors, but have evaluated and compared risk rewards and tried to analyse what may be the opportunities to look for over the next five years.”

The report reveals the relative resilience of prices in most of the established ultra-prime areas. Prices in Jumeirah increased by an average of Dh7,000 from Q1 2015 to Q1 2016, while Emirates Hills was down Dh4,000 and Palm Jumeirah down Dh6,000. This compared to a drop in prices of Dh25,000 in Jumeirah Islands, down Dh20,000 in Jumeirah Village and down Dh16,000 in Sports City.

Godchaux said, “The realisation that the market is bottoming seems to have stimulated interest from investors and end-users, who have been waiting for deals, prompting renewed enquiries for value for money products, especially in the prime residential segment.”

Meanwhile, socio-economic and geopolitical deterrents, along with a consolidating job market across the region, are causing a decline on tenant demand in Dubai’s office market. According to Godchaux, “While demand for office space is expected to continue to be steady in DIFC through 2016-17, the office sales market is witnessing a drop in prices across all locations with secondary districts such as Business Bay, Tecom C and JLT seeing a higher year on year decline at 9, 13 and 17 per cent respectively.”



Source: Property Weekly PW


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