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- How did the Dubai residential market perform in the first half of 2014?
Real estate activity in the Dubai real estate market during the first half of 2014 was marked by sector stabilization and consolidation.
This is because the market continued to absorb the rapid growth witnessed in 2013.
It has been observed that budget-conscious investors are shifting their interest to less established communities along the Mohammed Bin Zayed corridor.
These communities include Jumeirah Village, Dubai Sports City and Dubai Silicon Oasis, which posted an average growth rate of 10% in Q2 2014.
The second quarter of the year saw a continuation of the slowdown in Q1 residential sales performance for Dubai, with the market witnessing marginal growth of up to 6% and 3%, respectively for apartments and villas.
- In what way has the rental market changed in recent times and are these changes likely to push up rental costs?
The rental market was dominated largely by demand from new arrivals in Dubai, with apartment rates increasing by 4% in Q2 and villas by 5%, and modest growth of 0% to 10% witnessed across Dubai. Apartment rental rates grew most during Q2 2014 in Jumeirah Beach Residence where the annual rental rate for a two bedroom unit increased by 10% to reach between Dh120,000 and Dh200,000, boosted by the release of the Al Bateen Residences. International City recorded the highest annual growth at 66% with a two-bedroom apartment currently leasing for up to Dh70,000.
Villa rental rates grew by 5% on average in Q2 with the popular Jumeirah location witnessing the highest growth of 12%. Jumeirah Village saw an 11% increase in Q2 due to its affordable positioning, with a three-bedroom townhouse typically achieving rates from Dh155,000 to Dh185,000 per annum.
- What areas are performing well in apartment and villa sales?
The top performers in apartment sales in Q2 2014 were Downtown Dubai and Jumeirah Beach Residence, both up by 11% to Dh3,300 and Dh2,000 per square foot, respectively.
Dubai Marina and Downtown Dubai led year-on year growth at 62% and 52%, respectively.
Jumeirah Village also showed 46% year-on-year growth with an increase of Dh300 to touch Dh1,100 per square foot.
The communities leading villa sales were Victory Heights and Palm Jumeirah, with an 8% and 3% increase, respectively, taking the per square foot sales price to a ceiling of Dh 1,450 and Dh4,000.
Palm Jumeirah recorded a 55% increase over the last 12 months while the newer Al Furjan community increased by 44% with properties currently selling at Dh1,200 per square meter.
- Is there a chance that property prices in Dubai could reach pre-crisis levels by the end of 2014?
It is extremely unlikely that they will reach pre-crisis levels by the end of 2014 because of the new Law No. 7 of 2013 or the the Real Estate Investor Protection Law and other related regulations that have now come into effect.
Three major pieces of legislation will come into effect covering the relationship between the landlord and the tenant, the general regulation of relationships in the real estate sector, and a mechanism for rent disputes.
These moves will encourage sustainable development in the real estate sector in Dubai, and will also up the transparency quotient to create a clear path for owners and tenants moving forward.
In general, the measures introduced by the government are aimed at boosting investor confidence in the Dubai real estate market.
- Question of the Week: How does the current climate of the Dubai market compare to the pre-crash years?
The key difference between the real estate market in the pre-crash era and in 2014 is the off-plan sales scenario.
Then, off-plan properties could be purchased with a 100% loan and flipped, causing a rise in property prices.
The government is now bringing specific measures into effect to ensure that off-plan sales are executed in a controlled manner by introducing new laws and regulations.
Previously, land could also be purchased without an escrow account being in place; however, with the new government laws, an escrow account must be established in order for any sales to proceed.
The market has particularly benefitted from two new property-related pieces of legislation drafted by the Dubai Land Department (DLD) - the Investor Protection Law (Law No. 7 of 2013), also known as Tanweer, and the Code of Corporate Governance for Developers.
Source: John Stevens, Special to Freehold
The writer is Managing Director - Asteco
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