Dubai Residential Property Market Review: Putting Current Prices & Trends in Perspective

January 28 2016
By Lookup.Ae Sales

Dubai 2016 Outlook Part 1: In this edition, we try to give a perspective on this market by going reviewing current & historic pricing as well as looking a bit closer at transaction trends, off-plan launches and buyer behavior.

Current Market Pricing in Perspective

Prices of freehold residential Real estate in Dubai reached their peak in Q1 & Q2 of 2014. Since then, a period of about 20 months, we've seen prices across freehold Dubai depreciate by between 10 – 15% on average. Specifically:

  • Freehold Villas on average have depreciated by 10.62%
  • Freehold Townhouses on average have depreciated by 15.7%
  • Freehold Apartments on average have depreciated by 12.3%

We do urge observers to take into account previous growth which between 2012 – 2014 (24 – 30 months) appreciated very significantly, propelling Dubai as one of the fastest growing real estate markets in the world once again:

  • Freehold Villas on average appreciated 55.2%
  • Freehold Townhouses on average appreciated 54.6%
  • Freehold Apartments on average appreciated 56.1%

Steady correction

The reasons for the correction are mainly attributed towards implementation of Govt. initiatives to curb speculation.

Prices started appreciating rapidly because of Arab Spring money, renewed confidence on Dubai's revival and a winning Expo 2020 bid.

Almost immediately before winning Expo 2020, regulations that prevented flipping were implemented which included doubling title registration and transfer costs, preventing POA transfers and ordering developers to not allow resales till certain percentages of off-plan were paid.

The correction is steady and gradual - nothing like a sudden collapse in pricing witnessed in 2008 / 2009. This has allowed over-leveraged investors & speculators to exit the market or leverage.

Property sales have slowed but according to Dubai Land Department data, property transaction values increased by 8% in 2015 compared to 2014. We believe one of the major reasons transaction totals and values increased in 2015 is because of backdated Oqood (new) registrations taking place for off-plan sales conducted over the past couple of years. This has probably skewed the numbers upwards.

Year Value Number of transactions
2011 143 b 35,297
2012 154 b 41,767
2013 236 b 63,652
2014 218 b 53,871
2015 267 b 63,719

New Off-Plan launches slow

The number of new project launches has slowed down as can be seen in this document below.

Year Total No. of Units Launched Apartments Villas Townhouses
2015 15,624 11,300 457 3,867
2014 17,451 10,366 5430 1,655
2013 15,435 6,742 4,679 4,014
2012 1,999 768 1,229 102

Other trends we witness for the off-plan market:

  1. Buyers purchasing off-plan are almost without exception looking at the mid-long term (2 – 5 years) down the line. Speculative off-plan purchases have almost entirely ceased because incentive for flipping has been eradicated.

  2. New developments with exceptional payment-plans are selling well (examples in 2015 include Danube projects, Arabella by Dubai Properties and Jade at the Fields).

  3. Developers are not increasing or decreasing prices. Gone are the days where projects sell out in hours or days. Developers are adapting long-term marketing & sales targets; however almost without exception, each off-plan development is selling – albeit more slowly. Slower sales progress may affect building delivery timelines.

  4. Investors are much more secure when buying off-plan in Dubai. Regulations implemented over the past 24 months include requirements for developers to own 100% of the land, 20% project value capital to be paid into Escrow account, sales proceeds paid into Escrow account managed with RERA and construction linked payment-plans.

Capital Values Performance of major apartment communities

The below table compares Q4 2015 prices with 4 previous reporting dates. In the past six months, price declines in most communities have slowed and in some cases have turned positive. Even with the correction, freehold apartment prices today are still 51% higher than Q1 2012 prices.

Since their peak in Q2 2014, freehold apartment prices have declined 10.4% on average. However, in most communities the major declines occurred through 2014 & early 2015. In many communities the pace of decline has slowed and in certain areas is again positive.

We can report that the area of Business Bay has been the best performing apartment market over the past 18 months.

Community Price change since
Q1 2012 (48 months)
Price change since
Q2 2014 (18 months)
Price change since
Q1 2015 (12 months)
Price change since
Q3 2015 (6 months)
JBR + 38.3 % - 15.2 % - 11.76% - 6.70%
Downtown +41.7 % - 12.4 % - 5.96% - 4.69%
Dubai Marina +44.2 % - 10.1 % - 3.87% - 0.94%
Discovery Gardens +48 % - 12.7 % - 8.28% - 2.28%
Jumeirah Village Circle + 69 % - 13.3 % - 6.33% - 4.54%
International City +49.9 % - 8.69 % + 0.98% + 1.70%
JLT + 37.6 % - 8.8 % - 9.92% - 2.78%
Business Bay +66.1 % + 5.9 % + 5.02 % + 2.47%
Executive Towers +50.3 % - 8.2 % - 2.19 % - 4.1%
Dubai Sports City + 48 % -  6.9 % + 0.15% + 5.33%

Dubai Freehold Apartments Historic Pricing

Capital Values Performance of major villa & townhouse communities

Average prices of villas & townhouses in freehold Dubai are still an average of 49% higher than they were in Q1 2012.

Community Price change since
Q1 2012 (48 months)
Price change since
Q2 2014 (18 months)
Price change since
Q1 2015 (12 months)
Price change since
Q3 2015 (6 months)
Jumeirah Park + 60.9 % - 14.6 % - 9.51% - 1.29 %
Meadows + 23.47 % - 17.21 % - 9.42 % - 5.9 %
Jumeirah Islands +26.39 % - 16.76 % -5.92 % - 5.13 %
Arabian Ranches +21.37 % - 15.41 % - 6.69 % - 7.8 %
Palm Jumeirah + 40.19 % - 10.27% - 5.13% -None
Springs +31.93 % - 18.3 % - 9.88 % - 6.56 %
JVT + 45.2% - 16.24 % - 6.25% -None
Al Furjan +22.6 % - 11.05 % -  3.68% -None

Dubai Freehold Villas Historic Pricing

Dubai Freehold Townhouses Historic Pricing

Summary

  1. The current correction has brought prices back to just before pre-winning-Expo 2020 levels. Most observers now believe that the market had already priced in winning Expo 2020 and the transaction activity that followed (between Nov 2013 – June 2014) was much more speculative. Those gains have been erased and the market is much more stable.

  2. Dubai is a buyer's market and buyers / investors currently looking to purchase are seeking value. This value is not always available or apparent. Almost the entirety of ready, mature communities are end-user driven and therefore the number of distress / value offerings are extremely limited. Sellers listing their properties for sale are finding it difficult to move properties on perceived market prices; we're seeing sellers revise prices downwards to attract buyers who are now patient and intent on obtaining the best possible price points.

  3. Off-Plan sales have slowed in Dubai and the prospect of many future launches in 2016 is limited. There is already a large number of under-construction supply which will be delivered through 2016 – 2018. The delivery of these units will impact sale & rental prices. However, we believe the impact on communities along SZR will be limited whereas the price pressures in emerging hotspots such as Al Qudra Road and Mohammad bin Rashid City will be higher.

  4. There are a number of unknown factors that can impact prices in Dubai. On the negative there is the prospect of lower oil prices which impact Bank liquidity and businesses in Dubai. As Government revenue decreases, there is more pressure to open up new revenue streams and hence the ongoing discussions regarding VAT and other corporate tax implementations. Regional tensions have also made buyers wary though historically such tensions tend to benefit the stable UAE market. The weaker global economic outlook and tightening of quantitative easing also worries investors.

  5. On a positive side, the Iranian nuclear agreement will mean a greater monetary flow, trade and investments between Iran and the UAE. The route for corporates looking to do business with Iran will run through mature Dubai.

  6. The next major turnaround for Dubai's market will be when the numerous hospitality & tourism initiatives are completed. These include Bluewaters Island, Dubai Parks & Resorts and the Dubai Canal. There are a number of other projects also planned which include museums, a safari, the Dubai frame etc. These projects will further strengthen the diversification of Dubai's economy and help ignite another real estate revival leading upto Expo 2020.

  7. We do not necessarily foresee a great rise in capital values over the next 2 years. There are pockets of opportunities but considering Govt. regulations, new supply and a more mature mindset, it looks unlikely that prices in Dubai will appreciate as rapidly as witnessed in 2012 – 2013 and previously between 2006 – 2008.


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