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Dubai residential sales
• Sales prices increased substantially in the fourth quarter compared to the previous quarter by 23 per cent on average and close to 60 per cent compared with the same period in 2012.
• Despite these steep growth rates, sales prices remain, on average, 21 per cent lower than their peak in 2008.
• While the majority of buyers are cash buyers, the fourth quarter saw an increase of end users and mortgage buyers taking advantage of the fact that the new law regulating minimum loan-to-value (LTV) is not consistently enforced.
• In the fourth quarter, we witnessed owner-occupiers and investors keen to enter the market as rental rates were on an upward trend, which indicated better returns and potential for capital appreciation in the medium term.
• In terms of major trends, we have seen substantial increases of property prices for both apartment and villas located within the Shaikh Mohammad Bin Zayed Road (formerly Emirates Road) belt. This stretch of road has seen vast improvement in terms of accessibility and facilities offered in the different communities.
• The positive sentiment was exacerbated with Dubai's winning bid for the World Expo 2020 to the extent that it allowed developers and buyers the opportunity to launch several projects, most notably Casa by Emaar at Arabian Ranches.
• With strong positive sentiment witnessed throughout the year, and specifically during the past quarter, several new developments were launched and well received by the public such as Vida Residences and Fountain Views in Downtown Dubai.
• Asteco anticipates that this -year will see a continuation of the trend witnessed in the previous year with sales prices increasing, albeit at a slower pace, as approximately 25,000 residential units are forecast for completion this year and further projects are expected to be launched.
Dubai office sales
• There has been an increase in activity in the office strata market, particularly for properties in Business Bay, which bas enjoyed significant increases in sales rates due to low sales prices during the economic downturn. The Business Bay area bas grown as new projects have been completed and the area becoming an established commercial district.
• The supply of small- to medium-sized office units remains significant and Asteco anticipates continued growth at a relatively slower rate than residential sales, with both driven by owner-occupiers and investors.
Dubai residential leasing
• Residential leasing rates in Dubai witnessed significant growth rates for apartments, on average, by 22 per cent since the previous quarter and close to 50 per cent compared to the last quarter in2012.
• Rental growth was driven by a steady influx of people to the city, partially due to the continued unrest in the region. Furthermore, Dubai winning the bid to host the World Expo 2020 has led to additional requirements for staff accommodation in the food and beverage, leisure and construction industries as a number of companies see the potential of expanding their Middle East operations.
• Overall, master-planned communities have become more attractive, even in previously less desirable areas, as road networks have improved and more community centres and facilities (such as parks, retail, health clubs, schools etc) are available.
• Villa rental rates have also increased, albeit at a slightly slower rate of 6 per cent compared to the previous quarter and up 20 per cent compared to the same period last year.
• Larger master-planned communities have performed especially well as community living continues to be popular, even for smaller families that prefer the security, facilities and proximity of a larger compound compared to a standalone villa.
• New releases in areas such as AI Furjan and Jumeirah Park have been hugely popular this quarter, as road connectivity to Ibn Battuta Mall and major roads have improved.
• The residential leasing market is expected to remain strong for all product types this year due to strong market sentiment witnessed by the business community following Dubai's winning bid to host the World Expo 2020. However, the rental rate increases will not be as aggressive this year due to a substantial amount of new supply entering the market.
Dubai office leasing
• Office rental rate growth has been relatively slow, however, significant improvements were witnessed in terms of the number of inquiries and size requirements.
• While previous demand was for smaller office space of up to 5,000 sq ft, requirements are now for larger areas of up to 10,000 sq ft or entire floors. This would indicate the expansion of small- and medium-sized companies in Dubai as well as new entrants to the market.
• Most new companies are keen to sign longer leases of three to five years as they anticipate substantial rental growth in the medium term and seek to offset the initial cost o1 investment.
• Asteco is of the opinion that office rental rates have overall bottomed out and we expect to see some growth over the short to medium term, particularly for single-owned and single-managed buildings where supply is limited.
Source: Property Weekly