Dubai’s high-end freehold communities are seeing some sort of price stability, probably for the first time since mid-2014. The main reason for that is these locations are seeing fewer off-plan launches, which would add to the pressure on ready properties there.
And a some of the locations are starting to see prices climb up from the trough. Values at the Palm Jumeirah has recorded a price growth 1.2 per cent in the 12 months to end March, while at The Lakes, the gains have been by 2.6 per cent, according to the latest Knight Frank update on the local property market.
The Palm is seeing a steady trickle of high-end transactions, including one for a reported Dh76 million plus paid on a penthouse at a recently completed project, the Palme Couture. Another Palm-based development, The Alef Residences, too has been an investor magnet, market sources say.
All this is starting to show up on how prices are faring in key upscale locations. “Prime markets in Dubai are seeing somewhat of a stabilisation,” the report says, adding that across the board, these locations have seen a drop by an average of 2.6 per cent in the year to the end of the first quarter of 2018, but down from the 5.5 per cent decline seen over the previous 12 months.
And where new supply continues to be added, as at the Downtown, the pressure on prices continues. But even here, there are some positive signs emerging. The latest year-on-year decline is pegged at 5.2 per cent, down from the 9.8 per cent drop over the 12 months to end March, 2017.
Capping new supply is not the only way that luxury developers are responding to a soft market. “In Emirates Hills, prices have fallen by 12.2 per cent in the year to the first quarter of 2018. Lower levels of demand and more realistic vendor expectations have driven prices lower,” the Knight Frank report notes. “We remain optimistic as to the performance of the prime market relative to the mainstream over the course of 2018.
“Aside from Downtown, the level of supply due to be delivered in prime communities remains manageable. This combined with more realistic vendor pricing will drive demand for prime.
“The single largest factor which is likely to continue to put pressure on prices is supply. In 2018, Knight Frank expects up to 33,000 units as scheduled for delivery. If this level of supply comes to fruition, it may drive prices lower and could impact confidence.
“However, the severity will vary, community by community, and we anticipate that pricing in mature communities, which are rich in amenities and offer good connectivity, are likely to be impacted the least because of this.”
Of the 54 freehold locations/communities tracked by the report, 46 recorded price declines up to end March. “A year earlier all communities were witnessing prices softening,” the report adds. “The current gap between the top and bottom ranking communities, in terms of annual price performance, currently stands at 7.6 per cent. These price movements show that we are continuing to see a fragmented market emerge.”
Taking a more cautious approach on Abu Dhabi realty
In Abu Dhabi, property buyers could still be inclined to sit on the fence, according to Knight Frank.
“We remain cautious on the outlook due to the level of supply set to be delivered in 2018,” it adds. The report estimates “up to 8,150 residential units will be delivered. With investors and owner-occupiers choosing to adopt a “wait-and-see approach”, leading to a lack of demand. We are unlikely to see the current residential market situation begin to improve in 2018.”
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