Dubai: When Rajesh Singhvi listed his five-bedroom villa in The Meadows for sale two months back he thought Dh5.2 million would be a decent price. Today he is about to close the deal — at Dh5.5 million.
“I decided to hold on and see how far I could go. Now I have found a buyer for Dh5.5 million,” said Singhvi.
It’s the same story elsewhere too. As the market picks up, property owners are getting pricey.
A four-bedroom villa in Arabian Ranches is selling for Dh5.2 million, a three-bedroom villa in The Springs is going for Dh2.4 million and a three-bedroom apartment in Palm Jumeirah is fetching Dh2.3 million.
So are we back to 2007-2008 prices?
“In some areas we are back to late 2007, early 2008 prices. But this is not the case everywhere. Prices in the current market are ‘real’ and the properties are worth the value they are selling for,” said Renan Bourdeau, Managing Director, Propertyfinder.ae.
According to Bourdeau, Palm, Marina, Downtown, Jumeirah Park are the main areas experiencing increases. “Average return on investment (ROI) in these properties is around eight per cent. Confidence has returned to the market and we’ve seen more expats moving back to the region,” he said.
The average ROI for properties hovers between six and seven per cent, touching eight per cent in some areas.
According to a report by Jones Lang LaSalle — Dubai Real Estate Market Overview Q3 2012, overall residential prices increased 14 per cent year-on-year (Y-o-Y). Villa prices shot up 23 per cent (18 per cent higher than 2008 prices). Apartment prices increased four per cent, but were however 18 per cent less than peak 2008 prices.
“The residential market appears to be on a clear recovery path with both sale indices and rental indices improving. Major improvements remain more noticeable in primary locations. Lower quality buildings in secondary and less completed locations are the ones suffering as tenants are constantly upgrading to better quality projects,” says the report.
Manoj Gur of Blue Water Real Estate said: “Price increases today are not a result of speculative selling. They are healthy and recording natural growth. Prices today are no way like what we saw in 2007 - 2008. Today it is driven by genuine demand from end-users, a sign of a maturing market. Many long-term investors too are back as they have realised the positivity in the property scene. Strong rules and regulations from Rera especially on off-plan properties is further ensuring the right support is being given to property buyers.”
Craig Plumb, Head of Research at Jones Lang LaSalle, added: “Improved sentiment, stronger economy and employment growth are key factors pushing demand. Banks are keen to provide mortgage finance to end users, furthering the demand to buy properties. Completed projects in established communities with facilities are seeing a price rise.
“Most buyers are end-users wishing to live in the property, with continued demand from second home buyers looking at Dubai since it is a politically safe and stable destination. Many of these are long-term investors that are being attracted to Dubai’s real estate market.”
Mohanad Al Wadiya, Managing Director of Harbor Real Estate, said there has been significant movement in values in certain areas. “Villas, especially in The Villa Project, Arabian Ranches, Victory Heights, The Springs, The Lakes and the Meadows recorded 10 per cent to 25 per cent Y-o-Y capital appreciation.
“In apartments, Palm Jumeirah, Downtown Dubai, Dubai Marina and the Greens recorded an increase of 5 per cent to 15 per cent y-o-y increase,” he said.
Al Wadiya emphasised that the price rise is not superficial. “There are always three essential ingredients for any real estate market to grow effectively. They are the 3C’s - capital, confidence and clarity. The relationship between them can either be positive or negative. The good news today is that they are on the rise.”
”There is a significant capital infusion into the real estate sector from a number of sources. Creditors such as banks have been more willing to lend cash as the world and local economies are returning to a semblance of growth. Lawmakers in Dubai have been working hard to address the issues of transparency in the sector. Therefore, there is nothing superficial about prices. They are being driven by fundamental market factors of supply and demand.”
Many financial institutions are revving up their mortgage portfolios with some offering rates as low as 3.99 per cent. LTV ratios, however, have been reduced from 85 per cent to 50 per cent.
Expected residential completion in 2013
Dubai Silicon Oasis – 734 units
Dubai Marina – 1,309 units
Jumeirah Village – 1,773 units
Dubailand – 1,030 units
Dubai Sports City – 1,541 units