Dubai: Speculation that Dubai’s property market is overheating could be misplaced — even with the steady recent gains home prices are still 31.1 per cent off their 2008 peaks, according to a new report by property consultancy, Cluttons.
“Recent IMF [International Monetary Fund] concerns about the market overheating may prove too negative,” the ‘Summer 2013’ report tracking the first six-month performance of the UAE realty notes. “An expanding economy, coupled with a rising population, currently forms the backbone of Dubai’s housing demand. However, buy-to-let investors, both from within the UAE and further afield, are also contributing to overall buyer requirements,” the report stated.
In other words, current asking prices are founded on genuine demand coupled to rational asking prices. Even with the upscale projects launched in the year-to-date, developers have put up price tags that seem to have found a willing buyer base. Both villa and apartment prices were up 20 per cent and more during the second quarter compared with a year ago, with apartment units recording growth double that in the second quarter of 2012.
Mortgage limits
Dubai property values had dropped 49.7 per cent post-recession. The current values are 36.9 per cent above the second quarter of 2009 market low.
The steady build up in transactions and values should continue, even if new mortgage limits come into effect. But unlike a blanket lower loan-to-value (LTV) cut-offs, which was what banks and prospective buyers were worried about, it is likely that this would apply only to those with mortgages taken out on multiple property purchases.
But the office marketplace in Dubai remains subdued, though prime office rents have shown “their first signs of positive growth in over four years, with rental values rising by 2.7 per cent during the first-half, after remaining unchanged last year and declining by 2.7 per cent in 2011.”
The report has this caution for landlords with office space in their portfolio — “Challenges remain for many of Dubai’s newly built office towers, where strata ownership barriers prevent large-scale leases and driving landlords to offer more competitive rents in an attempt to entice relocation.”
