Dubai
While freehold transactions in Dubai are up a healthy 20 per cent in the first five months, when it comes to property values they are either in decline or, at best, growing in anaemic single-digits.
On the plus side, this means prospective buyers — especially end users — can still get in at prices that are still quite accessible. And if property values continue to move within this narrow band, it means less chances of the market situation turning volatile and impacting on demand. For a market still nursing its way through an upturn, that means a lot.
But for property investors, they could do with more robust value gains that are in sync with the volume gains a particular location is having.
According to the latest Reidin-GCP Dubai realty update, the Jumeirah Village Circle cluster recorded the highest gain in values — by 4 per cent — during the January to end May period from a year ago. It was followed by the villas on the Palm, up 3.4 per cent, while the island’s apartments saw a 3.2 per cent uptick.
In contrast, property transactions in Jumeirah Village Circle were up 22 per cent during the same period, while demand for apartments on the Palm shot up a substantial 38 per cent. (On the downside, the Downtown area recorded a 4.4 per cent drop in average transaction values, while that at Dubai Marina and Business Bay were down by 2.4 per cent from a year ago.)
So, what’s with this lag between property volumes and their prices? “If transactional activity continues to ratchet higher, we can expect citywide price escalation in the coming months,” states the Reidin-GCP report. (In the first five months, 7,152 off-plan properties (up 58 per cent from a year ago) and 5,397 ready units were sold (a gain of 17 per cent from 2016’s first five months.)
According to Sameer Lakhani, managing director of Global Capital Partners, “Price movements — both on the positive and negative sides — have been subdued. This is classical behaviour the market has been exhibiting for the last 12 months. Most indices are showing that the markets have remained unchanged on a year-on-year basis with certain communities showing moderate gains.
“The market is exhibiting a typical base effect, and the fact that transactions continue to rise across the board is the best indicator for further gains.”
Interestingly, two of Dubai’s favoured locations — the Marina and Downtown — recorded a slight decline in property values — by 2.4 per cent and 4.4 per cent, respectively — in the first five months. This despite both generating sizeable demand, with off-plan sales at Dubai Marina up 120 per cent and sales of ready properties gaining 10 per cent on 2016. The Downtown on its part had a 61 per cent year-on-year gain in off-plan deals and 6 per cent with ready units.
At the Marina, only 380 units were released as off-plan in the first five months, while for the Downtown they totalled 1,462 units.
“In Marina, there has been a slowdown in launches ... far greater than in the Downtown,” said Lakhani. “The slight erosion in prices since the beginning of the year can be attributed to the fact that both communities are considered luxury and in this price cycle the luxury end suffered greater than the citywide average.
“Interestingly, what we are witnessing in certain communities is luxury prices have shown early signs of firming up — as at the Palm and in Arabian Ranches. While some analysts have dismissed this as a false start, the fact that prices and transactions have remained robust is an indicator that sentiment has changed despite the geopolitical and macroeconomic headwinds.”
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Dubai’s newest freehold attractions start to see secondary activity
* Those investors who couldn’t get in at the time of their launches can now buy properties in Dubai South and MBR (Mohammad Bin Rashid) City off the secondary market. “In all cases, across Dubai freehold, there has been a bounce off the lows seen in the middle of last year, with prices in the off-plan space in certain cases rising by much as 20 per cent from their lows,’ said Sameer Lakhani of Global Capital Partners.
* The upturn first showed up in Dubai’s stock market activity. Since the start of the year, it is becoming just as apparent in the property space on the transaction side. Now it is up to property values to catch up. “We opine the resilience and the subsequent rebound in sentiment, activity and prices will continue,” says the new Reidin-GCP report.
