Business | Property
Market looks up to Burj Khalifa
The many property owners in Downtown Burj Khalifa are well within their rights to expect a boost from the opening of the super-tall structure in their neighbourhood. However, it may not be as quick as they would like it to be.
- By Nicole Walter, Features Editor, Property Monthly
- Published: 00:00 January 1, 2010
- Image Credit: Supplied
- A high level of prestige is associated with a landmark building the stature of Burj Khalifa , and even in the current situation.
It will be more likely for values to inch higher and then stabilise at those levels rather than make any dramatic gains in the period immediately following the Burj Khalifa opening.
"The opening will need some time to settle, probably six months or so, before any positive impact can be seen," states Elaine Jones, CEO of Asteco, preferring to take the long-term view. "We may even see some traffic issues, however, it will add to the atmosphere and bring more life."
The marketplace is awaiting confirmation on when the around 700 apartments and 200 offices in Burj Khalifa are to be handed over to their owners. Interestingly enough there was a recent decline in unit prices in the skyscraper, in part attributed to the occasional distress sale. But that should change as soon as there is clarity on the handover schedule, and the opinion among industry observers is that it should start in the second quarter.
"Prior to the handover we may see an increase in motivated sellers. However, once there is greater certainty around the actual delivery date, we expect prices will stabilise and marginally increase," reckons Jesse Downs, director of research and advisory services at Landmark Advisory.
There have also been adjustments in line with the present dynamics of the market on the rental side. A one-bedroom in Burj Khalifa should fetch the owner around Dh150,000, but "actual rents will depend on the handover date and inventory, many have bought units as second homes, or purely for capital growth with no intention of leasing the unit out," Jesse suggests.
But what of the Downtown itself? Investor appetite is certainly there for the surrounding properties, but is still relatively light-weight. According to the property portal Reidin, during a 90-day period up to end October '09, there were just over 40 sales transactions for properties in Burj Residences and Burj Views registered with the Land Department. Nearly half of these had mortgage backing and were snapped up at pretty reasonable prices, with a one-bedroom with a terrace going for just over Dh1 million and a two-bed unit going for Dh1.8 million.
Following Emaar's confirmation that the tower would indeed open on January 4 through a ‘soft launch', there is a discernible renewed interest across the wider area.
"Overall, we expect the opening of Burj Khalifa to have a positive impact across the entire development, we expect to see demand levels pick up, not just for the tower units, but also for adjacent properties," notes Matthew Green, head of research and consultancy UAE, CB Richard Ellis Middle East.
"A high level of prestige is associated with a landmark building of this stature, and even in the present situation, demand is expected to be high. Office occupation within the wider Downtown development has reflected exceptional levels since 2007, and has even been sustained during the downturn. Vacancy rates within Emaar Square currently sit at less than five per cent against a backdrop of rising vacancy rates across many other developments in Dubai."
Not everyone in the local market holds the same opinion though. Ronald Hinchey from Cluttons reckons that the opening of the world's tallest tower may create more awareness of its surroundings, but won't affect residential prices and rental levels.
"Downtown Burj Khalifa will follow the general market recovery, no area can fight market forces, we first need more liquidity in the market for people to be able to buy," affirms Hinchey. "It may however help fill up rental properties and push sales deals — and that is what we really need."
Hinchey's sentiments will surely find universal favour with all those existing investors in the Downtown Burj Khalifa area. And if that happens, this will also pave the way for investor ranks to swell with new buyers. Then we will be able to say that the ‘Burj effect' has come into play.
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