It's been just over three years since one of the worst global financial downturns crippled the Dubai real estate market. Every new year comes with a lot of hope for those in the industry, and year 2012 is not different. While 2009 and 2010 didn't give much for the market to cheer about, the general consensus is that 2011 so far has been an excellent year, especially for the residential sector in Dubai. Property prices showed signs of stabilising, as did rentals. Overall, the market witnessed quite a few transactions, indicative of good times in the forthcoming months as well. Property catches up with a few prominent members of the real estate industry to find out what exactly they expect to see in the residential market of Dubai in 2012.
Mohanad Alwadiya, managing director, Harbor Real Estate
Overall the residential market is expected to do well in 2012. While 2009 was a nightmare, 2010 saw some recovery and 2011 was way better than 2009 and 2010. Things are improving. Hotels are full and shopping malls are crowded with shoppers. The Dubai brand is still very strong and the continuous development of the infrastructure is playing a great role in boosting the appeal of Dubai. Average properties in Dubai should give a net yield of between 6 and 9 per cent. Since the prices are 50 per cent down compared to the boom-time prices, the property you buy will appreciate in the years to come.
Today people are beginning to accept reality and starting to regain confidence in the market, because the overall economy and its fundamentals are getting better. People who bought in 2009 have already made money in capital appreciation and rental yields on their investment. Agents are now looking for properties as more buyers are showing interest in Dubai's recovering property market. Distressed sales are becoming very rare and this is surely a positive sign. Now in these specific areas, property prices are beginning to go up again. In terms of leasing, a product with good location, quality and facilities will attract a lot of clients. We rented over 1,020 apartments in the last six months, which is a clear indicator of the current scenario in the leasing segment.
Mahendra Singh, managing director, SPF Realty
Dubai is back in business and 2012 will be a good year for the residential real estate sector in the emirate. In 2011, Dubai has managed, to a great extent, to repair its image tarnished by the debt crisis. Less than three years ago, foreign investors turned their back on Dubai but now things are changing. Hotels in Dubai have seen a rise in occupancy levels this year. The unrest prevailing in the rest of the regions has forced businesses to move their bases to more stable locations such as the UAE. The tourism sectors in Egypt, Jordan and Bahrain have been affected, making the UAE a natural choice for tourists visiting the region.
As far as the residential sector is concerned, 2012 is going to be very good. Good quality properties in nice locations are helping the market gain stability. This year, in a few areas where there is a robust infrastructure, property prices have gone up by 10 to 15 per cent. Still it remains much cheaper to buy in Dubai than in India or China, so investors are more attracted to this country than ever before. Also, the return on investment is in the range of 6 to 8 per cent, making real estate in Dubai an attractive proposition for investors from all over the world. Initiatives such as e-governance, regulatory policies, court procedures, and the government stand on making processes and procedures transparent are bringing back the much needed trust in the system. Taking everything into consideration, I can confidently say that Dubai residential market is poised for gradual growth in 2012.
Ahmad Shaikhani, managing director, Memon Investments
Year 2011 was much better for the market. Prices and rents stabilised and there were quite a few relocations. Investors are beginning to become more confident in the market. New businesses are coming into the market, which will automatically bring more people and that, in turn, will generate a demand for rented units. Once the level of occupancy is high, investors will show more interest in the market and they will start purchasing more units. There is more transparency in the market thanks to the regulations introduced by Rera (Real Estate Regulatory Agency) and the Lands Department. All the transactions have to be registered with Rera, which has given a lot of confidence to the investors.
People are no longer interested in selling their properties at throw-away prices, and this augurs well for the market. There will be more supply coming in 2012, but Rera is controlling the supply so that it doesn't affect the market adversely. Demand is also there because people from some of the strife-torn neighbouring countries are looking at Dubai as a safe investment destination. These investors have already created a demand in the rental and freehold sectors and they will continue to do so in the new year as well, which is a very good sign.
JeanLuc Desbois, managing director, Home Matters Mortgage Consultants
More of the same is how Home Matters sees the mortgage market in 2012.
Increasing appetite and introductory offers will continue next year. This will have a positive effect in increasing transactions and property prices, particularly villas. Average interest rates should reduce by approximately 0.25 to 0.5 per cent. Home Matters is calling for banks to pass on rate reductions to existing clients. Many are offering new clients better rates but are charging existing clients 7-8 per cent. New business is important but client retention should be an even higher priority for lenders.
Greater transparency in how bank rates are calculated is also on our wish list. Currently, several banks appear unable to accurately document rate calculations and formulas in final offer letters. If you're paying too much on your mortgage, speak to an independent consultant on how you can secure better terms, as there are banks waiving set up (processing fees) to assist clients in moving mortgages. Home Matters is working with a number of banks regarding financing for new projects, such as Jumeirah Park, which will start handover in 2012. We'll also see commercial property mortgages return next year, which will be good for this segment. The mortgage market is evolving rapidly and banks are launching new offers regularly. This is excellent news for the consumer and will lead to better-value mortgages in 2012.
Judy Lam - regional research manager, Asteco Property Management
The residential leasing market saw relatively high transaction activity this year given the usually slower summer months and Ramadan. For 2012, we expect transactions to remain at a consistent level as more supply enters the market. Although demand from tenants relocating and new arrivals will continue, it will not be sufficient to absorb the future supply. Besides, the new supply will result in further price competition for owners and increased choice for tenants. Asteco expects rental rates for apartments and villas to remain steady with minor declines for low quality or poorly managed buildings in certain areas. Developments such as Discovery Gardens, JLT, Dubai Marina, Palm Jumeirah, Downtown Dubai, Emirates Living and Arabian Ranches will continue to see activity in 2012, but are likely to compete with emerging developments despite the lack of infrastructure and out-of-town locations of the latter, due to larger unit sizes being offered at significantly lower rates.
This year, the sales market saw the majority of transaction activity in established areas such as Dubai Marina, Downtown Dubai, Emirates Living, Arabian Ranches and Palm Jumeirah. We expect the same level of transactions to continue in these areas and also for developments on Emirates Road, which are in the process of being handed over, with infrastructure and facilities nearing completion and properties available at discounted prices.
During the year, developers launched a variety of schemes to attract buyers, most commonly lease-to-own options. We expect developers to continue to include lease-to-own-schemes for completed projects and discounts on bulk sales and/or flexible payment plans for off-plan units. Sale prices in select locations have become more or less stagnant with new areas or unfinished developments experiencing a decrease in sale prices. Although sale prices are bottoming out for some of these properties, we believe that premiums will only be achieved for a few select developments that come with added-value components.