Confident investment in dubai property at start of 2013
The real estate specialist’s latest report showed a positive trend in the emirate’s marketplace across the past six months, with activity driven by tourism and business, leading to new property developments.
Dubai’s strengthening property market is a reflection of the UAE’s improving economic performance, says Cluttons. Indeed, Dubai is expected to be a key driver in the predicted growth of the UAE economy of 4% in 2013. Dubai International Airport reported passenger numbers of over 57.8 million in 2012, paying testament to Dubai’s ideal location for global tourism and business.
Early 2013 was characterized by a period of confusion in the Dubai residential property market following the Central Bank announcement of a series of loan-to-value cap levels for expatriates and UAE citizens applying for mortgages of 50% and 60% respectively. The bank is now in a period of consultation with the national banks and Cluttons speculates that a ‘watered down’ version of December’s legislation may be implemented in coming months. However, it remains to be seen as to whether such measures will result in a move towards a market controlled by cash rich speculators.
Renewed market confidence in Dubai is impacting on the residential market, which has recorded robust growth in nearly all sectors in the past six months. Between Q3 2012 and Q1 2013, average prices for high-end villas rose by 8.9%, while mid-range villas have experienced gains of 14.9% over the same period. The lower budget end of the villa market registered the sharpest rise in values of 20.2%, although this was from a lower base than the rest of the villa market. This trend has been mirrored in the apartment segment, where both high and mid-range apartments have recorded average price increases of 10% each, while lower budget apartment units registered price growth of 14.6% over the same period.
Similarly, the rental market has also experienced substantial growth; high-end villas recorded average rental value increases of 9.7% between Q3 2012 and Q1 2013, while the mid-range villa segment registered an average rent rise of 6.2%. Lower budget villas echoed the strong performance of the lower budget villa sales market, recording rental value growth of 19.6%. Apartment rental values also followed a similar pattern, with the sharpest rise in rents recorded at the lower budget end of the market with a rise of 12.7%, followed by the mid-range segment that grew 7.7%; the higher end of the market was the weakest performing segment at 6.4%. Cluttons’ research suggests that rising rental values are driving tenants towards lower budget options, which have struggled over the past two to three years, with even more secondary and tertiary locations enjoying renewed activity.
Steven Morgan, Head of Cluttons UAE, comments: "We are buoyed by the renewed confidence in Dubai’s residential market and increased activity in the sector. This has naturally led to price rises – as much as 20% in one quarter. In many other developed markets this would be classed as a ‘boom’ and it would be short sighted not to have some consideration to this. We welcome moves from the Central Bank to prevent the development of an overheated market and the likelihood of a bust scenario."