Business | Property
Focus on high-end properties a worry
There is concern in Dubai and in the Middle East and North Africa (Mena) region that developers have an "overwhelming" focus on high-end properties, neglecting the larger, mid-income group, according to senior officials at Colliers International.
- By Suzanne Fenton, Staff Reporter
- Published: 23:25 October 5, 2008
- Image Credit: Supplied picture
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Dubai: There is concern in Dubai and in the Middle East and North Africa (Mena) region that developers have an "overwhelming" focus on high-end properties, neglecting the larger, mid-income group, according to senior officials at Colliers International.
"There is a very strong demand for mid-income housing but historically, that hasn't been the practice," said Rami Tawfiq, research manager at Colliers.
With huge anticipated demographic growth, there is a demand for more mid-range houses, offices, retail space and hotels in Dubai.
"In general, demand is met with an insufficient amount of supply," Tawfiq said.
With a strong demand and lack of supply, sales prices and rents are all affected. "In conditions of boom, there is inherent risk of bust," he warned.
This problem intensifies as latecomers to the market are also forced to position themselves towards these premium products.
"We expect to see a move away from speculative, off-plan [buying] and more thought given to the end-user's benefit," Tawfiq said.
Bandwagon investment
"Across the regional property markets, we've seen a case of bandwagon investment where second tier developers seek to replicate the success of first movers by building similar products en masse," said Ian Albert, regional director of Colliers.
Albert predicted there will be more developers at this year's Cityscape with a greater variety of products on offer.
With increasingly jittery sentiment, Cityscape hopes to calm any investor concerns. While Dubai is arguably still the place to invest, some may just not have the liquidity to buy.
"The only thing to worry about in this region is liquidity. There is a strong demand but the question is, is the cash available to purchase?" Albert said.
High net-worth individuals may be looking more at the US and UK to snap up properties at bargain prices, Albert said.
In the first quarter of 2008, the average property appreciated by around 16 per cent. This is compared to an average appreciation of 42 per cent between the last quarter 2007 and the first quarter 2008, Colliers's latest real estate report noted.
The report showed average rents in Dubai are around $420 per square metre per year, the second-most expensive location in the Mena region, after Abu Dhabi. The cheapest is Riyadh at $60 per square metre per year.
As far as house prices go, the average sales price in Dubai is $5,420 per square metre. In Riyadh, again the cheapest, the average house price is $655 per square metre.
Such high prices in Dubai are commanded, in part, by properties in Burj Dubai, DIFC and Palm Jumeirah, where prices range from $7,800 to $9,900 per square metre, on average.
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