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A close look at Dubai's property rent and sale prices will show how timing, amenities and leisure facilities are vital to many property investments.
Residents of Dubai are constantly evolving and people keep on looking at the best deals even when prices are climbing up.
We had an opportunity to get viable views from James Perry of Haus & Haus about the current real estate trends in Dubai and the investment potential that is available here.
Real estate transactions this year
This year has witnessed a number of noticeable changes to Dubai's property market. There has been some stabilization due to the UAE Central Bank's revised lending caps. This is coupled with the transfer fee increase from 2 to 4 per cent in late 2013. The increase in sales figures we have witnessed in the last four years have begun to slow in the second phase of 2014 for the secondary market.
The changes have been, in some part, due to the mechanisms that have been put in place, but, in positive terms, have been also due to a more mature, cyclical property market that is now being experienced in Dubai. Through dealing with a large number of end-users, seasoned real estate developers have had a successful year with Arabian Ranches 2 and the Mira and Mira Oasis communities. The sentiment is that there is confidence in the developer and with the opportunity to live in a brand new villa.
Clients are prepared to wait as an offset to securing a quality build in a new and exciting community. The developers' focus is mainly on residential, but we have also seen a large influx of buyers in the Business Bay area, with Dubai Properties' Bay Square development being particularly popular.
Economic boom and demand for property
The larger developers have achieved successful hikes in pricing throughout the year on the latter phases of the same developments. It will be interesting to see whether Q4 follows suit. There are a number of defining factors which have helped shift New Dubai areas' property prices. The availability of schooling within the vicinity, accessibility, amenities, number of units released, and, on a broader basis, economic and political factors all play a pivotal role in monetary terms.
The recent stability of the secondary market has certainly been in part due to the mortgage loan-to value calculation. What we are tending to see is that properties under the Dh5 million threshold are being more prevalent, and those above this figure are now much more of a niche market.
Expert developers have done transactions this year whereby the listing prices have been just above the Dh5 million mark and sellers have been more open to price reductions in a bid to make the figures more accessible to buyers. We would have seen a slowing in the market naturally but the mortgage caps have definitely had an impact.
Investor wise, certain areas of Dubai still offer attractive gross yields to those who want tangible assets. Villa communities have significantly cheaper service charges, thus narrowing the gap between gross and net yields. For this reason, a large proportion of our investors tend to lean towards these communities. Dubai is viewed as a safe haven for most people, and with increasing rental values, offers the real possibility of strong returns.
Developers have seen a slowdown at the luxury end of the market – the 65 per cent mortgage loan to-value has certainly influenced this. The summer in Dubai has an effect, too – the soaring temperatures see a lot of high net worth residents spending summers in Europe or their home countries.
Dubai's long-term outlook based on fundamentals is believed to be solid. There is still a large influx of investors coming here. There have been some fantastic projects released. Dubai's major developers have launched plans in the coming weeks, and come September, we can envisage the market strengthening.
Trends in Dubai real estate market
• Investors are more after the quality of the property; hence, they are willing to stand by for a new and exciting community
• A large proportion of investors tend to lean towards villa communities because of their affordable service charges
• Property prices go up in communities where there are availability of schools, amenities and facilities, and easy accessibility to transport links
• Properties under the Dh5 million threshold are prevalent, while those above this mark are considered a niche market
Click on Investing and learn more about investing in residential properties in Dubai
Source: Cleofi-Krista Capili, Special to Freehold