Dubai property prices set to rise as confidence returns
Consumer confidence in the Dubai property market has returned, according to new figures from Cluttons.
The report shows that apartment prices have climbed by 4.9 per cent in the emirate since the beginning of 2012 - a trend that is predicted to continue.
Rents have also increased by 6.8 per cent, although Cluttons acknowledges that the averages conceal several areas in Dubai that did not see any growth.
Overall, the trend in the marketplace is positive, with average sales for high-end villas rising from 1,100 AED per square foot in January to 1,300 AED per square foot in September 2012, and mid range villas rising from 550 AED per square foot to 650 AED square foot in the same period. Indeed, mid range villas have also witnessed a rise in sales price from just under 750 AED per square foot in January to nearly 900 AED per square foot in September of this year, which now match prices of spring 2007.
According to the Dubai Land Department, Dubai property transactions grew 21% to AED 63 billion (USD $17.15 billion) in the first half of 2012, compared to Q3 and Q4 2011. Cluttons confirms that internal valuation instructions for both villas and apartments increased by almost a quarter (23%) compared to the fourth quarter of 2011, with 50% of these representing mortgages on new property acquisitions.
Proximity to metro stations is a new factor hailed by Cluttons, which has "quickly begun to affect popularity and prices this past year". "The metro transport link has now established itself as a substantial variable, affecting an individual's decision when short-listing property," reads the report. "The majority of areas close to the metro stations have maintained their demand and in most cases have increased in both capital and rental values."
Cluttons condludes: "Dubai's strengthening property market is a reflection of the UAE's improving economic performance. According to a recent Merrill Lynch Global Research Report, GCC 2020, Dubai's diversification model has the right mix to accelerate growth. The report finds that Dubai's superior infrastructure investment and robust population growth has established solid foundations for future economic growth. Dubai is widely viewed as a regional financial, transport and logistics hub, placing it in an excellent position to benefit from regional growth.
"According to Dubai government published figures, foreign investors buying real estate were responsible for acquisitions of AED 28.3 billion (USD $7.7 billion) in the first half of 2012, up 36% from the same period last year. In addition, trade license applications were up 9% in July 2012 compared to the same monthly period in 2011, according to the Department of Economic Development, giving a strong indication of improved business confidence in the Emirate.
"Cluttons predicts that prices will remain relatively stable over the next 12 months, as the 24,000 residential units scheduled to be delivered in the second half of 2012 will bring a large stock of supply onto the market making huge price uplifts or a ‘boom' scenario unlikely."