Dubai
property slowdown continues in Q2 2014
Communities
along Mohamed Bin Zayed Road corridor gain 10% as budget-conscious buyers shy away
from higher-priced property locations says Asteco Q2 2014 report
- Average apartment and villa rents increase 4% and 5% respectively in Q2
- Average apartment and villa sales prices rise 6% and 3% respectively in Q2
The
second quarter of this year saw a continuation of the slowdown in Q1 2014 residential
sales performance for Dubai with the market witnessing marginal growth, up 6%
and 3% respectively for apartments and villas in Q2 2014; but the latest market
report from Asteco anticipates renewed interest and activity in Q3 2014.
H1
2014 activity was marked by sector stabilisation and consolidation as the market continued to absorb the rapid growth
witnessed in 2013. According to the Asteco Dubai Q2 2014 report, interest shifted
to peripheral communities such as Jumeirah Village, Dubai Sports City and Dubai
Silicon Oasis, as many prospective purchasers remained priced out of the more
popular areas of the city such as Downtown Dubai and Dubai Marina.
“We recorded positive growth rates of around 10% in Q2
for these areas, but at the same time there was a decline in interest in the previously
popular affordable communities of Discovery Gardens and International City,
which only registered minimal growth, indicating that they are now topping out
price-wise and any further growth will take them out of the affordable
bracket,” said John Stevens, Managing Director, Asteco.
Stevens
also noted that sellers who raised their prices following the Expo 2020
announcement are intent on maintaining their position, which has resulted in a reduction in transaction levels, especially for higher
priced properties within established communities.
A raft of recent new launches, including Dubai
Properties Group projects such as Manazel Al Khor in Culture Village, Rahat
Villas at Mudon, and 200 new units at Remraam, have joined a growing list of
announcements with Damac also launching its NAIA Hotel and Hotel Apartments, 34
premium Fendi Villas at Akoya Drive, and two hotel apartments at Jumeirah
Village.
Emaar also continued its string of new launches with
Opera Grand, the first residential development in the Opera District at
Downtown Dubai, and Danube’s inaugural UAE project, the 171-townhouse Dreamz
community at Al Furjan.
In
terms of apartment sales, the top performers in Q2 2014 were Downtown Dubai and
Jumeirah Beach Residence, both up by 11% to AED 3,300 and AED 2,000 per square
foot respectively while Dubai Marina and Downtown Dubai led year-on-year growth
at 62% and 52% respectively. Jumeirah Village also showed 46% year-on-year
growth with an increase of AED 300 to touch AED 1,100 per square foot. In
comparison properties in Dubai Silicon Oasis and Dubai Sports City are
currently changing hands for AED 800 per square foot.
The
communities leading villa sales were Victory Heights and Palm Jumeirah, with an
impressive 8% and more moderate 3% increase, taking the per square foot sales
price to a ceiling of AED 1,450 and AED 4,000 respectively. Palm Jumeirah
recorded a laudable 55% increase over the last 12 months while the newer Al
Furjan community jumped by 44% with properties now selling at AED 1,200 per
square foot.
“We anticipate that post the summer months, there are
likely to be several new project announcements that will test demand in the
market, giving buyers new opportunities to invest,” he remarked.
The
rental market was dominated largely by demand from new arrivals into Dubai,
with apartment rates increasing by 4% in Q2 and villas by 5% with modest growth of up to 10% witnessed across Dubai.
“With rents increasing steadily since 2013, many
existing tenants have elected to remain where they are and
absorb the rent
increase, as indicated by the RERA rental index, rather than start from scratch
and incur the cost of moving, agent commissions etc.,” said Stevens.
Apartment
rental rates grew most during Q2 2014 in Jumeirah Beach Residence where the annual
rental rate for a two-bedroom unit increased by 10% boosted by the release of
the Al Bateen Residences.
International
City recorded the highest annual growth at 66% with a two-bedroom apartment
currently leasing for up to AED 70,000 while Jumeirah Lakes Towers rose by 54%
year-on-year, to reach AED 150,000 for a two bedroom apartment.
Villa rental rates grew by 5%, on average, in Q2 with
the popular Jumeirah location witnessing the highest growth of 12% (40%
year-on-year). Jumeirah Village saw an 11% increase in Q2 (20% year-on-year)
due to its affordable positioning, with a three-bedroom townhouse typically
achieving rates from AED 155,000 to AED 185,000 per annum.
Compared with Q1 2014, office leasing in Dubai was
relatively slow in Q2, with Dubai Investment Park and Dubai Internet City the
areas most in demand, with an overall market average rental rate increase of
just 2%.
Office sales flat-lined in Q2, however, a major
transaction was concluded by Dubai’s first real estate investment trust, (REIT)
with the AED 600 million-plus purchase of more than 15 vacant office floors in
Index Tower, at DIFC.
Asteco predicts an increase in enquiries and
transactions post summer, supported by ongoing economic improvements and activity
on the part of companies budgeting for the year ahead, and those expanding or
relocating and in the market.
“We expect the main beneficiaries of this increase in demand to be the
quality single-owned office buildings in prime business locations such as DIFC,
Sheikh Zayed Road and Dubai Media & Internet City,” noted Stevens.
For
more details, please visit www.asteco.com
A copy of the full Asteco Dubai Q2 2014 report can
be downloaded from –
Asteco, a major regional and
international real estate services firm and the largest property services
company in the United Arab Emirates, was founded in Dubai in 1985. Asteco offers independent market analysis,
design development consultancy and valuation services, sales and leasing
services, as well as asset and property management services.
