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Dubai: Real estate in Dubai is making a comeback of sorts — on the stock markets as well as on the property side.
The share prices of real estate companies have been outperforming the wider DFM (Dubai Financial Market) index, since it touched a low on December 20. Stocks of Emaar and Union Properties are up 43 and 46 per cent respectively, while that of the construction giant Arabtec propelled to an 82 per cent increase (before trimming some of those gains in recent days).
The activity smacks of investors rushing in to pick up bargains or driven a sense of nascent optimism starting to take hold. “There appears to be much greater optimism on the visibility of earnings as investors have realised that the pessimism had been overdone.” said Sameer Lakhani, Managing Director at Global Capital Partners, the investment firm. “It is difficult to ascertain whether the recent spurt in volumes has been concentrated among a small number of investors.
“What we know is that Arabtec and Emaar have the widest investor base on DFM and this suggests that it is likely that the activity has been broad-based rather than concentrated.”
But upbeat investor sentiment should not get to ahead of itself. There will be bouts of extreme volatility ahead, both related to macro issues — such as those over oil prices — as well as the fact that listed companies have changed their (International Financial) accounting standards and which could have a bearing on their upcoming first quarter financials.
Meanwhile, property buyers in Dubai continue to sift through some of the best “bargain buys”. If the first few weeks of the year saw these reflected in transactions at Jumeirah Village, Sports City and JLT, it is now extending to prime locations as well.
“In February, areas such as Palm Jumeriah, Emirates Living and Downtown registered a flattening out [as opposed to a decline] and/or a nominal increase in the number of transactions recorded,” said Lakhani. “This suggests the buying that is occurring is not from the institutional investor but rather of buyers starting to opportunistically purchase homes either for end use and/or yield-based investment given that prices have recorded a decline of up to 30 per cent in some of these areas.”
Local estate agents are also talking about upbeat returns in February. Allsopp & Allsopp’s had its highest sales volume since its formation in 2008, with a 62 per cent increase in buyer registrations on the same month in 2015. Of the February figures, 52 per cent of the properties it sold were on the market for less than two weeks.
“Under current market conditions, we’re regularly seeing desirable properties at an achievable price receive multiple offers from buyers,” said Lewis Allsopp, CEO, “This shows the real strength of the market and has the combined effect of keeping supply tight, demand high and, as we’re starting to see, prices increasing.”
But others are not so sure that an across-the-board price increase is on the cards ... at least for now.
“The current correction has brought prices back to just before pre-winning Expo 2020 levels,” said Gibran Bham, Co-Founder of Lookup.ae, a property portal. “Most observers now believe that the market had already priced in the winning of Expo 2020 and the transaction activity that followed — between November 2013 to June 2014 — was much more speculative. Those gains have been erased and the market is much more stable.
“Sellers listing their properties for sale are finding it difficult to move properties on perceived market prices. We’re seeing sellers revise prices downwards to attract buyers who are now patient and intent on obtaining the best possible price points.
“We do not necessarily foresee a great rise in capital values over the next two years. There are pockets of opportunities but considering government regulations, new supply and a more mature mindset, it looks unlikely that prices in Dubai will appreciate as rapidly as witnessed in 2012—13 and between 2006—08.”
Property transactions are getting broad-based
* The level of transactions in Dubai’s freehold clusters are shaking off their declining trend. If communities such as Jumeirah Village, Sports City and JLT were the first to see the turnaround, it is now starting to inch towards Dubai’s premier residential addresses as well. Palm Jumeirah had transactions of over 40 in January and February, while Emaar’s Emirates Living neighbourhoods had 92 deals being struck in February. “What we are witnessing is a continuing stabilisation of transactional activity across the spectrum of communities,” said Sameer Lakhani, Managing Director at Global Capital Partners. “While there has been nothing as dramatic as what was witnessed in the equity markets, there has been a continuing uptick in transactions.”
Number of transactions
Location November December January February
Jumeriah Park 16 21 12 22
International City 182 117 160 144
Sports City 178 44 61 75
Discovery Gardens 38 28 47 32
JLT 112 95 97 95
Palm Jumeirah 52 35 44 42
Emirates Living 115 123 85 92
Downtown 62 55 38 44
Jumeirah Village 81 72 52 72
* According to forecasts by ValuStrat, recent project delays spilling over into this year and the next could swell supply by more than 35,000 residential units. “It’s worth noting that this volume may be subject to significant downward adjustment as the year advances,” said a statement by the consultancy. “However, we do expect the percentage of delayed projects to generally decrease as we approach 2020.”