Dubai Marina and Downtown buck the trend

Dubai: For a more upbeat version of recent activity in Dubai's real estate space, a tale of two clusters — Dubai Marina and Downtown — will suffice. And the trends within both offer lessons the rest of the property market can — and should — follow.

Market sources confirm that sales activity has increased in recent weeks at Downtown, with the values helped along by the limited new supply getting added there. Depending on the project and the property, prices these days range between Dh1,200 to Dh2,000 a square foot, while it is in the range of Dh2,700 to Dh3,500 a square foot for the residences in the Burj Khalifa. Apartments in The Address Downtown are fetching Dh2,000 to Dh3,000 a square foot, and Dh1,500 to Dh2,500 a square foot in the Old Town.

No doubt these values exude a far healthier hue than the vast majority of available property in the local secondary market. For anyone looking to restart stalled projects, Downtown offers a clear rationale — of limited supply translating into sustained rates — for them not to.

"There are not many options available in terms of re-sale in Downtown, which has a direct upward impact on the prices of the available properties," said Mahendra Singh, CEO of SPF Realty.

As for Dubai Marina, a clear two-tier structure is starting to emerge within the master-development and related to how much of an effort the developer is putting in to maintain the properties.

According to Tamara Stubbs, residential community specialist at Better Homes' Dubai Marina office, even a third-tier has come into being in terms of leasing preferences. "Higher quality properties still include the La Reve, Emaar and Trident developments, although the best quality are still the ‘first built' in the Marina," said Stubbs.

"The quality at the top end has dipped for some of the newer towers even though the developers have good reputations for quality finishes. Buildings such as the Torch and Ocean Heights are considered mid to higher end, whereas JBR, Zumurud and Marina Wharf are classed as mid-range.

"The low-end are those that have had maintenance issues or the quality has deteriorated."

And where quality suffers, so does the rental value that the property can command. Within Dubai Marina, the rental value gap between the tiers is hovering at between Dh20,000 to Dh30,000. Unless the concerned developers plan on doing something, the gap will only widen in the years ahead.

Dubai Marina is not done with new deliveries and that will lend another dimension to how property and rental values in the mid-term. "What has happened because of the new supply is that buyers are taking a little longer than average to arrive at a final decision," said Singh. "It's a sort of survival of the fittest and the better quality buildings or properties are still selling and at a ‘price'. As such, there isn't a major impact because of the new stock — good quality properties are still holding their value."

Quality will thus be the only defining parameter. Developers who try to scrimp on offering certain acceptable levels of service and quality are doing themselves a disservice.

"When one looks at other global property markets and historical data of cyclical periods of boom and bust, it is always the high-end, most expensive property in the market that comes back first," said Richard Paul of Cluttons.

"Dubai is no different and 2011 has seen values of unique properties, such as penthouses and high-end villas return to growth."