Hearsay has it that the Dubai property market is headed southwards. Some call it a slump or slow down, while others claim it is a correction. There is talk of headwinds and stabilisation, and cruel comparisons are being made of prices per square foot across communities in a bid to measure what has dropped the most.
Hard evidence on the other hand seems disassociated from dismal rumours though. The Dubai Land Department reports that real estate transactions in the emirate last year valued collectively at Dh267 billion, marking an 8 per cent increase over 2014. The total number of transactions at 63,719 also marks an increase of 18 per cent over 2014’s 53,871 transactions.
Seemingly, there is also a lot of fence-sitting. In a recent poll conducted by real estate consultancy Cavendish Maxwell, 46 per cent of Dubai’s real estate agents opined that apartment values in Dubai could drop by up to 5 per cent in the first three months of the year, while 33 per cent were certain prices would stay the same.
There’s also the large number of new properties in the pipeline and possible delays thereof, overall subdued investor sentiment, and a looming global financial crisis. Plus points include incredible offers from developers, easier financing from banks and developers, a favourable increase in the affordable property sector, and wider, cheaper choices in the secondary market.
The latest edition of Mashreq Property Wealth Gauge, a private newsletter for the bank’s Gold customers, says developers will continue to launch new projects in the affordable category with attractive back-loaded payment plans through 2016-17, although transaction activity will remain subdued on account of cautiousness from purchasers and sellers.
Rental yields are attractive
According to the Mashreq report, Dubai residents may consider purchasing property this year, instead of just renting: “With price falls continuing to outpace rental value declines, rental yields are significantly encouraging buyers for purchasing as an option versus renting.”
In a recent report by property consultancy Land Sterling, Discovery Gardens topped the list of communities offering the best rental returns to investors. Gross rental yield was 10.2 per cent in 2015, compared to 9.4 per cent in 2014. Average selling price fell to Dh846 per square foot, down 7 per cent from Dh913 in 2014.
“With rental prices in Dubai’s iconic locations on the fall, and rental prices in not-so-popular communities on the rise, it makes more sense to become your own landlord,” says the developer of Aces Avenue, an upcoming building in Jumeirah Village Circle. The company is currently selling its studio apartment online at Dh329,999, with payment structured as 10 per cent for booking, four instalments of 10 per cent, and 50 per cent on handover. The developer predicts the annual rental yield of the studio will be Dh40,000.
The value-for-money factor
Adel Amer, an agent at Espace Real Estate, who has worked the Dubai property market since 2006, offers a different dimension to the story. As the official representative of Dubai Properties Group, Espace is currently selling 5-bedroom villas at Mudon, and Amer says the list of interested buyers are headed by residents who are already homeowners, but who seek bigger space and better value. “I have clients who have been searching for a bigger home or a brand-new one for the last two years, especially people who own homes in The Meadows and The Villa.
“For them, Mudon is an ideal solution, as it offers more square feet and more plot land — for much less money.”
Prices are realistic
In the apartment sector, Espace is seeing keen interest from first-time buyers in Dubai Properties’ Dubai Creek and Executive Tower projects. After dipping and then peaking, getting regulated by law and then stabilised by the increased registration fees, apartment prices are now realistic, Amer says.
He believes that for people wishing to buy property in Dubai, especially end users, 2016 is a great year to take the plunge. “Why should property prices go down any further? If they do, it will not be more than 5-7 per cent at most.”
Meanwhile, Yasin Valimulla, Associate Director of Fine and Country International Realty UAE, writing in a newsletter to property owners, said: “From January 1-17, 2016, there were 614 completed property transactions totalling Dh1.9 billion in Dubai. In the same period last year it was a far [lower] figure.
“This shows that we are not in a crash or a rapidly declining market, but due to sellers being more realistic with asking prices, the transactions are continuing.”
The lure of established communities
Abdul Gaffar, Sales Manager at Cosmos Star, a real estate firm specialising in apartments at Jumeirah Lakes Towers (JLT), says, “There is no doubt whatsoever that Dubai is currently a buyer’s market. There are three key reasons why we have so many enquiries in JLT, in spite of the gloomy economic weather. Property prices are considerably down in comparison to 2014, while rental income at its lowest has never fallen below 8 per cent. But the most attractive feature of JLT is that it’s a well-established community. We seem to have everything — parks, lakes, restaurants, service providers, clinics, spas, hotels, metro access and more.
“When people come to visit, they are so impressed, they enquire about prices. When they find out how affordable it is, many of them become potential buyers,” he explains.
Average prices at JLT currently stand at Dh1,250 per square foot, while rental rates vary between Dh50,000 and Dh65,000 for a studio.
With a combination of factors driving Dubai into buyer’s market territory, experts across the industry seem to echo the same sentiment. Now is the ideal time to evaluate options, get an edge, and pick something up— for one or more reasons.