Property News: Luxury realty in Dubai loses some of its growth sheen

Luxury homes in DubaiAn aerial view of Jumeirah Village. New supply will reduce the scope for sharp mark-ups in prime properties, a report from consultancy Knight Frank suggests l Image Credit: Gulf News Archives

Property News Dubai: The squeeze on Dubai’s property values getting too ahead of what can be deemed sustainable is paying off handsomely. The impact is most telling within the top-end of the residential marketplace.

A new report from the consultancy Knight Frank finds that high-end homes in Dubai saw value gains of 6.3 per cent in the first months of the year. That is a relatively toned down growth pattern given that values for such properties in the first three months of the year were up 11.7 per cent. (Some private sellers have unilaterally cut down their asking prices seeing the writing on the wall.)

According to market sources, new supply — and in substantial numbers too — such as Nakheel’s recent announcement of a new community of 1,000 villas will reduce the scope for sharp mark-ups in prime properties. Another launch, the Royal Estates project involving an alliance between three private developers, will create 2,000 homes at Dubai Investments and includes townhouses priced upwards of Dh1.6 million.

“While there will always be investors interested only in trophy purchases in Dubai, the rest of the market is being driven by long-term buyers and end-users,” said the head of a brokerage firm.

Where they had few choices earlier — and those already had steep premiums attached to them — they now have the flexibility to choose from a wide selection of new projects and multiple property formats.”

Home financing

Prospects are still favourable. Until such time the US Federal Reserve decides to hike rates, mortgage offers available here as of now do not burden the property buyer much (if one overlooks the upfront costs and the down payment requirement, of course).

Also in property news, more transactions are getting seeded through mortgages. In Knight Frank’s estimates, anywhere between 25 to 35 per cent of purchases in Dubai are done through the media of home financing institutions. This, the consultancy says, is “more than previously thought”.

But with more developers turning their focus to mid- and upper-mid range projects in the coming months, premium properties could yet make a comeback in terms of value growth. There are a handful of developers who have stated their intention to launch signature projects as soon as the new season begins in September. There could be more launches at MBR City and Meydan City, while Culture Village could become an all too alluring destination for high-networth investors once the first set of high-profile projects are complete.

But Knight Frank reckons such supply will still be within bounds. “With new supply at the prime level looking limited over the next 18 months we expect prices to strengthen in the remainder of 2014,” said Kate Everett-Allen, international residential research analyst at the consultancy.

Source: Manoj Nair, Associate Editor, gulfnews.comGN


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