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Throughout 2015, the Dubai real estate market experienced a correction with sale price declines across all areas of the city. This correction could be attributed to several factors, including falling oil prices, a weaker job market, fluctuating foreign currency, the general political instability of the region and the ample supply set to enter the market in the lead-up to the World Expo 2020. While these factors may have affected the sale activity in the market, developers have remained committed to the development and infrastructure growth of Dubai leading up to 2020, indicating supply will continue to grow.
Some of the major launches that have had an impact on the market last year were a series of new master developments, including Mohammad Bin Rashid (MBR) City, Dubai Creek Harbour and Dubai South, extending the city borders inland and changing the future landscape of Dubai.
Focus on affordability
The past year also saw developers diversifying their development portfolio with launches that have targeted a previously overlooked market segment. These developments have launched at what can be considered affordable price points without compromising on quality. Developers leading this market trend have been Nshama, with the launch of Town Square, and MAG Properties' MAG 5 Boulevard in Dubai South.
The city centre of Dubai is ever changing as its landscape evolves and begins to shift inland and away from the coast. The more densely developed areas such as Dubai Marina, Jumeirah Lakes Towers and Downtown Dubai have had a limited number of newly launched residential developments last year as they reach their development capacity. The completed developments in the first three quarters of 2015 have been in more peripheral locations such as Dubai Sports City, Dubailand, International City, Jumeirah Golf Estates and Jumeirah Village Circle.
While individual projects are still being launched, some of the key developers in Dubai have launched new master developments such as MBR City, Dubai Creek Harbour and Dubai South. With a number of residential developments already launched at these locations over the past two quarters, we see these areas becoming a focus of development moving forward as new communities are created.
Dubai Creek Harbour is set to be an extension of Downtown Dubai, offering high-end creek-side properties, while in Dubai South, the Al Maktoum International Airport and the Expo 2020 site add value to the residential developments to be delivered in the next four years.
There has been a partial shift in transaction volumes towards the off-plan market from the secondary market in the past year as buyers seek more value for their money in these new master developments and peripheral locations.
When launching projects outside the established areas of Dubai, the focus of developers is to deliver sustainable communities, rather than just individual towers. In a city such as Dubai where there is a lack of public transportation such as metro and bus lines outside of populated and established areas, developers are incorporating additional amenities such as a retail centre, a school and sometimes even a medical centre to bring value to the residents. The proximity to these elements remains one of the top deciding factors for buyers, especially for end users.
The Cavendish Maxwell Residential Market Survey has shown that the majority of agents have predicted that the apartment market prices will not decline further while villa prices could experience a decline of up to 5 per cent during the final quarter of last year and the first quarter of this year as a result of further handover of villa units during that period.
In the pipeline
Some of the anticipated completions this year, to name a few, are Akoya by Damac, Queue Point and Mudon phase two in Dubailand, Reem Mira in Reem, Seventh Heaven in Al Barari, Villa Lantana in Al Barsha South, The Pad in Business Bay and Burj Vista in Downtown Dubai.
Professionals in the real estate industry will be keeping a close watch on the launches and completions of projects in 2016 as this could steer the movement of property prices in the market. From the initial scheduled supply of residential units in 2015, 40 per cent have been completed to date, with many developments delayed to the first half of this year or to a later date next year.
With ample supply scheduled in the coming year, there could be pressure on the sustainability of the rental yields for investors, while for end users this could represent an optimum time to purchase. It still remains that the real estate market is highly affected by external factors such as economic, political and market sentiment, so it will be exciting to see what 2016 holds.
Have a look at Abu Dhabi's residential market landscape
Source: Dima Isshak, Special to Property Weekly
The author is research manager at Cavendish Maxwell