Dubai

Go in for a home at one of Dubai’s upcoming gated communities? Or will an investor get more bang for the buck from one at any of the city’s existing destinations?

Whichever way they plan to head, prospective buyers are going to be spoilt for choice. The many “districts” within MBR (Mohammad Bin Rashid) City are taking shape and some have even got in their first residents. Others like Nakheel’s Al Furjan and Warsan Village are in handover mode — and the developer has just introduced a 10 per cent upfront payment and the rest over two years for homes there. Prices start at Dh1.76 million for a three-bedroom town house in Warsan and Dh2.99 million for a similar unit at Al Furjan. (Nakheel’s mega-development in the making Deira Islands is principally focused on hotels and retail. There are residential towers, but the developer is retaining them for its leasing portfolio.)

The Town Square from Nshama on Al Qudra Road — a fast emerging location — is in the home stretch on the project side. Dubailand and the many mini-clusters within it are getting a lot of investor attraction. Dubai Properties earlier this week had the third phase of sales for the Serena villas in Dubailand, with prices of Dh1.3 million for a two-bedroom unit.

And then there is Dubai South, where developers have only begun to explore the possibilities the city-within-a-city can offer. But, already, those investors who got in early are seeing double-digit gains. “In terms of the best returns in current off-plan areas, the best performing would probably be Dubai South, having delivered plus 20 per cent returns in the last two years,” said Sameer Lakhani, Managing Director at Global Capital Partners.

“Dubai Creek Harbor also has gained interest among investors — but on a price performance basis returns to date have been more or less flat. This, however, has been quite a turnaround from the negative premiums that were witnessed on Creek Harbour units last year.”

“The data we are looking at comes with a lag. But what we can see clearly reflects a surge in investor interest in Dubai’s developing areas. At the same time, it is healthy to note that the increase in transactions appears to be sustained and not built on speculative momentum.”

In the first five months, 7,152 off-plan units were sold in Dubai (against the 4,521 units same time last year), while ready properties at the older communities were involved in 5,397 transactions.

“In Dubai, the premium for freehold is synonymous with gated communities,” states a new report from Reidin-GCP. “And where freehold buildings have come up in leasehold areas, rental and prices have gone up. The listed rental rates of various contiguous villa communities in Dubai — gated and non-gated — reveal that the former commands a higher premium in the range of 30 per cent. This is at the upper end of what has been observed globally, clearly confirming investor preferences for masterplanned communities.” For an investor, such gaps are the difference between a middling return and a super-charged one.

Of the established freehold zones, since 2009, the best performing segments have been the Downtown, Dubai Marina and the Palm Jumeriah.

“These are in terms of price returns,” said Lakhani. “When we factor in rental returns into the equation, the picture changes.

“From a total return perspective, the three best performing areas since 2009 are Dubai Marina, Discovery Gardens and The Greens. This highlights the importance of “real” returns, which since the 2009 cycle has accounted for 74 per cent of the total returns being experienced by an investor.”

 

Dubai’s gated communities pack in the best returns

Typically, gated developments command a premium of 12 to 30 per cent over their stand-alone counterparts. In Dubai, the difference between returns from gated and non-gated locations are stark, with the former type retaining premiums in the range of 30 per cent. “This is at the upper end of what has been observed globally,” states the Reidin-GCP report.

An estimated 37 per cent of Dubai’s villa stock are in gated freehold communities. With further developments on the way, notably in MBR City, it is “likely that gated communities in Dubai will be a much higher percentage than in comparable first world cities”.