Dubai: Jumeirah Islands, Dubai Marina and Arabian Ranches are the freehold clusters where the best “bargain” prices are available for buyers right now, based on current transactional data.
The bargains are based on what properties in these communities are going for now compared with the peak pricing at the market’s peak 18 months ago. In this regard, homes at Jumeirah Islands are down 16.8 per cent to an average price of Dh1,508 a square foot against Dh1,812 in mid-2014, according to estimates released by Global Capital Partners (GCP) and based on data from Dubai Land Department transactions.
Apartments in Dubai Marina currently average Dh1,523 a square foot against the Dh1,812 they were fetching 18 month ago, which works out to a decline of 16.2 per cent. Next comes the residences at Arabian Ranches, now at Dh1,102 per square feet (psf) after a 16.1 per cent drop.
“The recorded transactions in each of these communities have shown a much larger drop than what the indices reveal,” said Sameer Lakhani, Managing Director at GCP. “This indicates a phenomena of “distress” taking place, where price declines of 49 per cent have been recorded from their peak levels.
“It is pertinent to note that these offerings have been quickly snapped up as bargain hunters have come in. It is the incidence of these transactions that perhaps imply the formation of a base effect occurring.
“Given the supply/demand metrics at play, we opine that Dubai is expected to enter its recovery phase by late 2016.
“But mid-income housing communities such as International City and Discovery Gardens have only fallen by half to that of prime communities such as Dubai Marina and Jumeirah Islands in the third and fourth phase of the price cycle.”
Indeed, apartment values at Dubai Silicon Oasis and International City are down by 8.6 per cent to an average of Dh855 psf and Dh711 respectively from Dh935 and Dh778 in mid-2014. And in this particular down-cycle, Discovery Gardens’ residences had the lowest decline, lower by 7.8 per cent to Dh834 from Dh905. At Sports City, the units have dropped an average 10.2 per cent to Dh902 psf.
But, be it luxury or affordable, the bargains are there for the asking. “Cash investors are seeking distress deals at a discount to asking prices — luxury properties are certainly on their radar as potential capital appreciation remains high,” said Robin Teh, Country Manager at Chestertons Mena. “A 10-15 per cent (drop) facilitates a quick sale in current conditions.”
The upcoming Dubai Land Department numbers for the full year 2015 — and especially those for the fourth quarter — should provide some indication of whether investors are waiting in the wings for prices to drop further or already been active in picking up bargains.
And if ready or soon-to-be complete properties do manage to mop up a sizeable portion of the investor funds, where would that leave off-plan properties that are a further two to three years from being ready? There are many private developers who are proceeding with the sales launch of projects in Business Bay.
But if better bargains are available for ready, will off-plan sales suffer in comparison? According to Ranjeet Chavan, Director at SPF Realty, “The ratio of investors putting their money is evenly poised between ready and off-plan projects — both have their own benefits. Ready properties are ensuring annual returns of up to 7-8 per cent, while off-plan comes with the benefit of staggered payment options. Depending on the buyers’ perception requirement, both options are currently being explored by the investors.
“With infrastructure completed and almost all community developments being operational, these are the areas that will be driving the market in the next few years. Occupancy levels in these communities are above 90 per cent and to find a suitable vacant unit has become virtually impossible, with rental levels on the upward trend on a yearly basis.
“This is a real testimonial for the kind of demand that these areas are having currently — and this is expected to continue.”