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It's a brand new year and a perfect time to observe the latest trends shaping the property market and their implications.
Dubai's real estate market has undeniably cooled down over the last 12 months, a slowdown that has been attributed to a variety of factors, including currency fluctuations, the federal mortgage cap and the hike in property registration fees.
Other possible influences could stem from the retreat of Russian real estate magnates, who were among the top buyers of luxury property in the UAE. This comes after the fall of the rouble, which sank to record lows against the US dollar last month, and the Western sanctions on Russia, which have just been extended to another six months.
While many predicted the supply of up to 25,000 new homes in Dubai this year, the number was recently revised to between 10,000 and 14,000 units. At the same time, overall unit transactions declined by 33 per cent year-on-year in 2015, and average apartment and villa prices fell by 16 per cent and 14 per cent respectively. However, it is worth noting that the decline largely varied across the city, with high-end areas recording the most significant decreases. In Dubai Marina, for example, prices fell by up to 18 per cent during the first nine months of 2015.
In contrast, sales prices in more affordable freehold locations like Jumeirah Village Circle and Dubailand witnessed only slight drops, while in other areas they experienced growth. In IMPZ for instance, property prices showed a 3 per cent increase at the end of 2015.
On the other hand, rental values remained strong with no change recorded year-on year. In fact, in some communities such as Dubai Silicon Oasis and Dubai Sports City, as well as traditional areas like Deira and Bur Dubai, rents marginally increased.
All of these developments strongly suggest that we are currently in a buyer's market where affordability is becoming a top priority. Indeed, a recent report was that Jumeirah Village Circle saw a staggering 233 per cent increase in rent enquiries and a 152 per cent increase in sales enquiries.
Despite the negative forecasts circulating in recent months, the Dubai Land Department reported Dh53 billion in transaction value in the first six months of 2015, of which Dh30 billion came from non-Arabs. These numbers reflect confidence in the emirate's real estate sector and prove that lower oil prices have had little impact on the market.
As the shift continues towards affordable housing, developers are widening their scope to include mid-range properties in their portfolio, as evident from the launch of The Villages in Dubai South and Jebel Ali Gardens.
Most importantly, the demand for affordable property has urged developers to offer mid-market communities in their latest developments and to come up with flexible payment plans to attract end users, first-time buyers and long-term investors.
The latest schemes are waiving off the 4 per cent registration fees and stretching the instalments well beyond the property's completion date, enabling buyers to lease their units and use the rental income to pay off their instalments. To purchase a property in Dubai Investments Park's Centurion Residences, for example, a buyer would need to pay 30 per cent until handover in May and 70 per cent post-handover over a period of three years. Similarly, Damac recently announced that villas in Akoya could be purchased by paying 40 per cent until handover in June and 60 per cent over 18 months.
Hospitality groups on the Palm Jumeirah are becoming even more creative, offering prospective hotel-apartment buyers interest-free plans, guaranteed return on investment and complimentary stays at the resorts every year. Such incentives are likely to continue this year as more stock comes online, placing additional pressure on sales prices and rents.
Developers have launched new projects comprising an estimated 19,500 homes and by the end of the third quarter they had completed 3,936 buildings and 1,783 villas, according to figures from the Dubai Statistics Centre. This year around 7,400 properties should be handed over across various projects. These will include Dubai Sports City's Fortuna Village (June), Palm Jumeirah's Dukes Oceana (first quarter), Damac's Akoya (June), Sparkle Towers (December), Muraba Residences Palm Jumeirah (April) and first-phase villas of MBR District One (mid-2016).
With more institutions extending their operations into the UAE, the office market will considerably benefit. In a way, recent activity in this segment resembles the residential market as more firms migrate to more affordable locations in Silicon Oasis and Al Barsha, as well as the older business districts of Bur Dubai and Deira.
Smaller offices near transit areas like Jumeirah Lakes Towers and Business Bay are particularly being targeted for leasing, and so are industry-dedicated free zones such as Enpark and DuBiotech. According to the Dubai Statistics Centre, 12,328 new commercial licences were issued as of the third quarter, while 76,118 commercial licences were renewed.
Despite recent declines in sales prices, current conditions are clearly advantageous for investors, allowing them to make profits once the market shoots upwards. It is also an ideal time for tenants to take advantage of flexible payment schemes and become homeowners.
Did you know that rates still favour UAE's mortgage buyers
Source: Niraj Masand, Special to Property Weekly
The author is Director - Banke International Properties