Palm Jumeirah Special Report: August 2015

August 05 2015
By Lookup.Ae Sales

A closer look at the Palm Jumeirah master-development. Current and historical prices. Exploring apartment, villa, hospitality and retail components. Future developments. Supply of units and outlook.

To the rest of the world, Palm Jumeirah is an engineering marvel and is sometimes referred to as a modern wonder of the world. To most residents of Dubai, the Palm is a fleeting thought and visited infrequently. This may very well change in the coming months and years with new retail destinations comprising over 1.8 million sq. ft. set to enter the market.

Calculating vacancy rates and taking an average number of occupants for various types of residential property, we calculate that the total resident population of the Palm is about 26,000 residents as a conservative estimate. At peak times, the tourist population can rise to approximately 9 – 11,000.

As a development, the Palm is typically divided into 3 areas: the trunk, the fronds and the crescent. On the trunk is where you will find the majority of the mid-rise apartment developments. The frond consists entirely of villas, townhouses and plots by Nakheel. The Crescent is where you will find the numerous luxury resorts, although a few developments here do offer residential units.

Unlike most other master-developments in Dubai (except for Downtown Burj Dubai), the Palm consists of almost entirely very high-end or luxury real estate. The average price per sq. ft. for an apartment in Palm Jumeirah is about AED 2,200 per sq. ft. (USD 547). Villas on the Palm have an average price per sq. ft. of AED 2,900 (USD 794).

From a residential standpoint, The Palm Jumeirah has matured and there now very few residential developments that will enter the market. The hospitality market, however, has room to grow. There are now 3,352 hotel rooms under-construction and a total of at least 14 plots marked out for hotels / resorts are on-hold or have no construction activity on them.

The quality of life on Palm Jumeirah will improve with the opening of the Nakheel Mall (2017). The mall will have over 300 shops, a Waitrose, a clinic and a number of leisure activities which will allow Palm residents to enjoy life within their community as against driving to ever-crowded nearby developments (like the Marina, Mall of Emirates etc).

Apartment Market

The majority of the residential apartments on Palm Jumeirah are located on the Trunk of the Palm. Out of 5,824 ready apartments on the Palm, the 20 buildings of the Shoreline Apartments comprise about 44% of the current supply (2,604 units). Therefore, this development is usually the most actively transacted both in sale and rental terms.

Out of the current supply, we grade 4,068 units as high-end and only 1,756 units as luxury quality.

Out of the future supply which will be delivered between 2016 – 2018, we grade only 203 units as high-end and 993 units as luxury. The majority of the units that are under-construction were launched in between 2012 – 2014.

Since 2012 we have seen an ever growing trend across Dubai for serviced apartments. A lot of the new hotel / resort developments which have launched since that time usually also include a serviced apartment component. The advantage for the developer when building serviced apartments is that it allows for parts of the project to be sold during the construction phase at higher prices than residential. Serviced apartments are furnished units which can also be given back to the hotel pool to rent out, usually earning a higher rental return. All hotel apartments are classified as luxury.

The residential component of Palm Jumeirah has matured, with few projects to now be delivered – the future supply will not significantly impact this market. A majority of new supply is luxury serviced apartments.

Palm Jumeirah Apartments Map

The below table gives a break-down of the current prices on the Palm Jumeirah, some projects which have hotel apartments are also included:

  Status Classification Developer Location Unit Type Average Size (sq. ft.) Average Price (AED) Price Per sq. ft. (AED) Avg. Rent per annum
Azure U/C High-end Nakheel Trunk 1 Bedroom 1,011 2,500,000 2,473 -
2 Bedroom 1975 4,700,000 2,380 -
Club Vista Mare U/C High-end Nakheel Trunk Studio 600 1,500,000 2,500 -
Dream Palm Residence  Ready Luxury - Crescent 2 Bedroom 2,765 6,000,000 2,169 -
3 Bedroom 3,161 7,000,000 2,214 -
Golden Mile Ready High-end IFA Crescent 1 Bedroom 1329 1,650,000 1,242 120,000
2 Bedroom 1889 2,500,000 1,324 150,000
3 Bedroom 2500 3,600,000 1,440 210,000
Marina Residences Ready High-end Nakheel Trunk 2 Bedroom 1891 2,600,000 1,375 162,000
3 Bed Type B 2519 3,700,000 1,469 220,000
3 Bed Type A 4233 6,300,000 1,488 315,000
Oceana Ready Luxury Seven Tides Trunk 1 Bedroom 1596 2,500,000 1,567 158,000
2 Bedroom 1790 3,850,000 2,151 215,000
3 Bedroom 2329 5,250,000 2,254 255,000
Palm Tower U/C Luxury Nakheel Trunk Studio 551 1,750,000 3,176 -
1 Bedroom 980 3,500,000 3,571 -
2 Bedroom 1918 8,800,000 4,588 -
3 Bedroom 2598 12,000,000 4,619 -
Palm Views Ready High-end Nakheel Trunk Studio 504 1,200,000 2383 80,000
Serenia Residence U/C Luxury Palma Holding Crescent 1 Bedroom 918 2,375,000 2,587 -
2 Bedroom 1480 4,150,000 2,804 -
Shoreline Apartments Ready High-end Nakheel Trunk 1 Bed Comm View 946 1,500,000 1,586 115,000
1 Bed Sea View 1148 2,150,000 1,873 135,000
2 Bed Comm View 1819 2,400,000 1,320 170,000
2 Bed Sea View 1819 3,800,000 2,090 205,000
3 Bed Comm View 2222 3,300,000 1,485 200,000
3 Bed Sea View 2184 4,000,000 1,832 225,000
Tiara Ready Luxury Zabeel Properties Trunk 1 Bedroom 1126 2,600,000 2,309 155,000
2 Bedroom 1822 4,550,000 2,498 220,000
3 Bedroom 2330 6,000,000 2,667 255,000

Villa & Townhouse Prices

There are a total of 1,354 villas and 220 townhouses that are completed on Palm Jumeirah. There are a handful of townhouses in some developments such as the Marina Residence and Golden Mile which have not been included in the current supply. In terms of future supply, we can expect approximately 70 – 100 villas and townhouses that are being built within the various hotels / resorts on the Crescent of Palm. The majority of future supply for villas will come from the 3 fronds of Palm Jumeirah where an end-user or investor can purchase a plot of land to develop their own villa (keeping in account of community by-laws).

The below table gives an overview of current sale & rental prices of villas and townhouses on Palm:

Community Developer Location No. of Beds Average BUA Average Plot Size Price Low (AED) Price High (AED) Avg. Price psf (AED) Rental Price Range (per annum)
Signature Villas Nakheel Fronds 5 Bed 7,000 13,000 19,000,000 30,000,000 3,500 650 K - 870 K
Garden Homes Nakheel Fronds 4 Bed 5,000 7,000 10,000,000 14,000,000 2,400 375 K - 500 K
Canal Cove (Townhomes) Nakheel Fronds 3 & 4 Bed 3,950 6,000 7,300,000 8,500,000 2,000 315 - 360 K

It's interesting to get a historical perspective of prices of the villas on Palm Jumeirah as this is widely discussed across Dubai as a benchmark of market health and, mainly because worldwide, they are considered to be a symbol of luxury Dubai real estate.

When launched in 2003, Signature Villas were sold at AED 4.65 million and Garden Homes for AED 2.3 million. Almost all units were sold out within the first week of launch and unlike future launches that later took place in Dubai – the launch was not done over many months which in hindsight would have allowed the developer to earn much more than they initially did.

By the time they were close to completion, these units were trading in the secondary market for premiums ranging from 200 – 300% on their original values. In 2008, prices reached their peak.

It is difficult to give accurate transaction ranges for property on the Palm mainly because some of the transaction that take place (very few of them) can be much, much higher than the average range. These kind of transactions typically skew the market upwards – therefore, we do not include these type of transactions in the price ranges we provide.

The general rule of thumb on the Palm is that the higher the frond, and the higher the location of the unit on the frond – the higher the price it can command. Villas that face the Atlantis or the Marina skyline may also command higher prices than average. As with any luxury purchase, a number of other factors can affect price including upgrades, modifications and desirability – factors which cannot always be quantified.

After the market crash of 2008, Palm prices were probably affected the most. Garden Homes, which averaged AED 14 – 18 million were sold as low as AED 6 – 7 million in 2009 and 2010. Similarly Signature Villas which reached an average price of AED 25 – 30 million were also sold for as low as AED 11 – 12 million during the same time period. But prices rebounded pretty quickly and current asking prices on the fronds are not that far off from the peak period.

Signature Villas & Garden Homes Avg. Historic Prices per sq. ft. (AED)

Hospitality Market

There are a total of 9 Hotels & Resorts on Palm Jumeirah. A further 8 are under-construction. 6 of these 8 are expected to be operational by 2016. The largest hotel / resort on Palm Jumeirah is the Atlantis which has over 1,500 hotel rooms. A second property which will be located adjacent to the Atlantis, called the Royal Atlantis is currently under-construction and will offer a further 800 hotel rooms by 2018.

A total of 2,262 hotel rooms may enter the market in 2016 or early 2017. These include properties such as the Kingdom of Sheba, Sea View Club, The Emerald Palace Kempinski, The Viceroy, Dukes Oceana, and Dusit Emirates Saray. Many of these properties also have residential or serviced apartment components which are not counted as hotel supply.

Palm Jumeirah Hotel Supply

Retail Component

For a long period of time, the retail aspect of Palm Jumeirah has been limited but this is set to change significantly over the next few months & years.

At present, retail activity is limited to shops along the 10 sea facing buildings of Shoreline, this includes a couple of grocery stores, bars, cafes and restaurants. This retail is not well planned and is really meant to cater to the immediate needs of Shoreline residents for convenience.

Some observers have questioned the feasibility of such a large amount of retail set to enter the market over a short period of time. Others however point to Dubai's incredible appetite to absorb new retail destinations.

  Location No. of outlets Retail space Delivery
Golden Mile Trunk 70 300,000 Ongoing
The Pointe Crescent 148 500,000 2016
Nakheel Mall Trunk 200 1,000,000 2017

Investment Outlook

The overall Dubai market has cooled especially for ready properties. The real estate market appreciated on average between 25 – 45% between late 2011 and early 2014. Since then, on average, prices for freehold apartments in Dubai has depreciated 10.4% from their peak. Villa prices have fallen an average of 7%.

On the Palm, we use projects like Shoreline, Marina Residence, Signature Villas and Garden Homes as benchmarks as they are the more actively traded communities (mainly because of number of units). Villa prices have depreciated 12% from their peak in Q2 2014. Apartment prices have depreciated 13% from their peak in Q1 2014. So Palm has witnessed a more severe correction.

However, it is important to put this in perspective. Villa prices on the Palm actually appreciated (from their absolute low in 2010) by an average of 45.5% to their peak price achieved in Q2 2014. That means prices actually grew at an average of 11.3% per annum. Similarly apartments on the Shoreline appreciated at around 36% from their lows in 2010.

With such a rapid expansion of prices, it was expected that a slight correction would take place. Government policies have also impacted the market, with legislation put in place to cool an over-heated market.

Off-Plan Purchase Opportunities

Investors looking to purchase off-plan on the Palm Jumeirah have a few options right now. Here are a few examples:



Useful Links on Lookup.ae:

Akoya Imagine - 3 & 5 bedroom townhouses with prices starting from AED 1.0 million

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