Ask the Agent - How do sales prices compare across the UAE?

Ask the Agent - How do sales prices compare across the UAE?John Stevens

- How has the Dubai property market been in the first quarter of 2015?

The first three months showed little or no movement in Dubai's residential sales market. Following on from H2 2014 trends, the overall apartment and villa sales prices continued to fall as there is a shift in market preference away from high-end luxury to value-for-money projects.

There was limited movement in the residential rental market with only minor adjustments in select areas. Demand centered on established communities and affordable products augmented by the decision of many tenants to renew rather than relocate. High-end apartments in Dubai Marina and Downtown Dubai remain popular with secondary locations like Dubai Sports City also attracting demand. For villa rentals, the limited supply in Jumeirah/Umm Suqueim was good news for Al Barsha, which saw increased interest driven by its accessibility to schools and the city's major attractions.

- What trends in the property market are we seeing in Dubai?

The trend witnessed in the second half of 2014 continued in Q1 2015; transaction levels slowed and prices softened in selected areas whilst buyers looked for value-for-money projects in completed or close-to-completed developments.

Despite property sales and rental prices being close to Q1 2014 levels, Dubai remains unaffordable to many; thus, the Municipality and the developers shifted their attention to the under-represented affordable segment. The Municipality announced the allocation of over 100 hectares of land in Muhaisnah 4 and Al Quoz 3 and 4 to developers to build affordable housing for rent for those earning between Dh3,000 and Dh10,000 per month.

Similarly, other projects were launched in Q1 2015 including three and four-bedroom townhouses at Zahra and Hayat in Town Square. This highlights the continuous expansion of the city further inland as developers target the more affordable segment of the market.

- How has the rental market in Abu Dhabi fared in Q1?

Abu Dhabi's realty sector saw a sedate start with sales rates stabilising after a growth spurt in 2014, along with modest Q1 2015 rental rate increases for specific projects in key locations. Demand for high-end projects on Saadiyat Island and Al Raha Beach remained positive with Reem Island marked out as strong performer in terms of sales.

This was reflected in the rental market where units located in prime projects maintained an occupancy rate of 100% and overall stability in rates, with minor increases registered for certain developments. A number of popular projects registered a 3% increase in rental rates. Prime and high-end residential units continue to dominate demand and command higher rental rates. We are also witnessing demand for affordable units.

However, there is limited movement in overall villa sales transactions partly due to a shortage of available quality stock and continued price divide.

- Where were the largest increases in Abu Dhabi seen?

The largest increases in apartment sales prices in Q1 were in Al Bandar, which saw 3% increase, whereas Al Muneera, Al Zeina and Saadiyat Beach Residences all saw 2% increases. Marina Square, Al Reef Downtown, Sun & Sky Towers and The Gate remained the same. Villa sales prices in Al Raha Gardens, Golf Gardens, Al Reef Villas, Saadiyat Beach Villas and Hydra Village saw no increase on Q4 2014 levels. Comparing prime investment areas with lower-end Abu Dhabi island apartments, one and two-bedroom units in Shams Abu Dhabi rent for up to Dh120,000 and Dh180,000, respectively versus Dh70,000 and Dh90,000 for apartments in central Abu Dhabi. Off-island, the price drops further with one and two-bedroom homes in Khalifa and MBZ Cities going for D55,000 and Dh80,000, respectively.

A four-bedroom villa in Al Reef currently rents for Dh155,000, a three-bedroom in Hydra Village for Dh95,000. By comparison, a three-bedroom on Saadiyat Island would rent for up to Dh300,000.

- Question of the Week: How do sales prices compare across the UAE?

Overall, Abu Dhabi apartment sales prices increased by 1% on average, with 3% growth witnessed since Q4 2014 for mid-end properties, whilst sales prices remained stable in Ras Al Khaimah and Ajman despite only a few transactions completing.

In comparison, Dubai saw a 2% reduction of sales prices on average in Q1 2015.

Abu Dhabi continues to lack affordable apartments for freehold ownership, with the only development in this segment being Al Reef Downtown, where prices started from approximately Dh1,000 per square foot, which made it nearly 15% more expensive than comparable communities in Dubai.

The northern emirates are significantly cheaper as Ajman sold properties from as low as Dh300 per square foot, whereas the recently launched Al Rayyan development in Sharjah sold at an average rate of Dh700 per square foot.

In the high-end segment, however, Dubai remains the most expensive place in the UAE. It has been able to attract international and local buyers through better established property ownership laws and generally more high-end options available in highly sought-after communities.

These popular communities include Dubai Marina, Downtown Dubai and Palm Jumeirah, to name a few.

Ask the Agent - What attracts international investors to Dubai?

Source: John Stevens, Special to Freehold

The writer is Managing Director - Asteco

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