In the midst of the global economic crisis, collapse in housing prices and frozen construction sites were normal in Dubai. However, due to the attractiveness of this city as a tourist and business center, the situation began to improve quite quickly, but there was a long and difficult path ahead of the full recovery.
And in 2012, the statement that the best times had come again for the Dubai real estate market is no longer unfounded, this is indicated by the data of consulting companies and rating agencies. According to the Dubai Land Department, in the first half of 2012, the volume of real estate transactions increased by 21% compared with the same period last year and reached 63 billion dirhams ($ 17.2 billion). Rental rates begin to grow, development companies resume previously frozen construction and announce the launch of new projects. However, most studies agree that the rise in prices and rental rates is uneven in different segments of the Dubai real estate market, and it is becoming more fragmented. So how really great and stable is the revitalization of the market, and what really happens with prices, especially in the so-called “freehold” - areas where foreigners are allowed to buy property in property?
Let's try to figure it out with the help of Dubai real estate market specialists.
Buying Residential Property
In the residential real estate market there is a fairly rapid increase in prices. However, it is mostly concentrated in the segment of villas, where prices have already reached or exceeded the pre-crisis level. The report of the Global Market Perspective consulting company Jones Land LaSalle (JLL) for the third quarter of 2012 noted a 23% increase in villa prices in Dubai over the past 12 months. At the same time, apartments at the same time have risen in price by only 4%.
Increased demand is seen for villas and townhouses in areas such as Springs, Meadows, Arabian Ranches and Jumeirah Islands. For example, in the Springs area, the cost of a two-bedroom townhouse reached 1.5 million dirhams (about 410 thousand dollars), and with three bedrooms - 2.2 million dirhams (about 600 thousand dollars). Compared to last year, prices rose by 25-30%, especially rapid growth was observed in the third quarter of 2012, when the price of a two-bedroom townhouse rose from 1.38 to 1.5 million dirhams (from 380 to 410 thousand dollars), and three-bedroom villas - from 2.0 to 2.2 million dirhams (from 550 to 600 thousand dollars).
Residential apartments rise in price more slowly, although a lot depends on the popularity of each particular area. In prestigious projects with a good location, such as Jumeirah Beach Residence and Dubai Marina, prices are rising quite quickly, but in less prestigious segments they may not show positive dynamics. It should also be borne in mind that although real estate projects, including very large ones, have started to be launched again in Dubai in the last weeks and months, they will not come to the market soon. Until then, due to several "lost" due to the crisis of years in Dubai, there will be a limited supply of new housing.
Comment by Imex Real Estate
Dmitry Strakhov: “In fact, many world consulting agencies have recently reported that the Dubai real estate market has survived the effects of the global economic crisis and has begun to grow steadily. True, the degree and size of housing price increases are very much dependent on factors such as area, distance from the sea, infrastructure development, etc. However, a fairly stable growth of the Dubai real estate market as a whole can be noted, moreover, we are talking about both the rental market and the sales market. Apartments and villas in new projects from known "developers, such as Emaar and Nakheel, are selling out very quickly, which means that investor confidence is being restored. Good demand and limited, for objective reasons, the supply of new housing, especially coastal, creates the conditions for stable price increases."
Rental of property
A similar picture is emerging in the rental housing market with a return to pre-crisis indicators. At the same time, the increase in rental rates is more even than the change in prices for villas and apartments. The same JLL Global Market Perspective report for the third quarter of 2012 showed that the cost of renting villas for twelve months from September 2011 to September 2012 increased by 7%, and for apartments - by 5%. In addition, while real estate price increases are noticeably higher in prestigious areas compared with more modest ones, rental rates are rising in one and the other segment. For example, a significant increase in rental prices was recorded in budget areas such as Discovery Gardens and International City.
In Discovery Gardens, Nakheel’s low-cost development area, rental rates have increased by 25% since early 2012. Renting a studio apartment in this area will now cost 32-38 thousand dirhams (from 8.7 to 10.3 thousand dollars) per year, while in the first quarter of 2012 it amounted to 25 to 27 thousand dirhams (from 6800 to 7350 dollars). The cost of renting a one-bedroom apartment reaches 43-52 thousand dirhams (11700-14100 dollars), while in the first quarter of 2012 it did not exceed 38-40 thousand dirhams (10300-10900 dollars). Although renting luxury real estate in Dubai is not so expensive, by this indicator it is still one of the first places in the world. For example, the Prime Global Rental Index of the consulting company Knight Frank, which shows the rate at which 5 percent of the most prestigious residential real estate in the city is getting more expensive, has grown by 3% since the beginning of the year. Due to this, Dubai took the 9th place among the cities of the world included in the report, ahead of others Singapore, Hong Kong and Moscow and losing only to such cities as New York, Shanghai, Beijing, Zurich and Toronto.
Comment by Imex Real Estate
Eduard Burakov: “Demand for rental of residential real estate in Dubai has been growing steadily over the past year and a half. This is primarily due to the increase in the population of Dubai and the continuous influx of foreign expatriate citizens. This factor undoubtedly indicates the growth of the emirate’s economy. Moreover, Dubai is pulling tenants from neighboring emirates, attracting them with a high standard of living and a more developed infrastructure. The authorities of Abu Dhabi even decided to impose a ban on civil servants to rent housing in Dubai, since many people prefer come to life in Dubai, while working in Abu Dhabi. And that's in spite of the daily trips over 100 km in one direction. "
Office real estate market
Perhaps the most controversial situation is observed in the office real estate market in Dubai. On the one hand, according to various sources, the demand for offices in Dubai has returned to the pre-crisis level of 2007. This was facilitated by world oil and gas companies that are actively coming to Dubai to take advantage of high hydrocarbon prices and find new markets. A significant part of the demand falls on the companies already operating in Dubai, which are expanding due to the growth of the emirate's economy and high business activity in the region.
At the same time, in Dubai there is an excess supply of office real estate, which negatively affects rental rates and occupancy rates. At the same time, significant volumes of high-quality office space are constantly being commissioned, for example, in the actively developing area of Business Bay.
As a result, the rental price is kept at a stable level only in upscale properties with a good location. For example, in the area of International Financial City, the most prestigious segment of the office real estate market, rental rates are kept at AED 2,700 ($ 750) per square meter per year. The relatively stable cost of renting Class B office space in the Tecom area, where it averages 1100 dirhams (about $ 300) per square meter annually.
However, Tecom, as well as Business Bay and Jumeirah Lake Towers, has a high percentage of unoccupied space, and in older office complexes, owners are all the more forced to constantly reduce rental rates to attract tenants.
What is ahead?
Dubai's real estate market is finishing clearing the rubble left over from the recent crisis, and is preparing for a new leap. Surviving the crisis, real estate developers put their finances in order and report growth in profits, previously frozen projects begin to be completed, for the completely hopeless state is looking for new investors.
For the first time since the crisis began, leading market players announced new projects. Capital has again flowed into Dubai from all over the region, and not only because it has confirmed its status as a “safe haven” with excellent infrastructure and investment climate.
At the same time, all the major players do not want a repeat of the skyrocketing prices of 2007-08, in which the share of the speculative component was very high. The largest development companies Emaar and Nakheel, which almost simultaneously limited the possibility of speculative resale of unfinished apartments and villas in their new projects, also took steps in this direction. Thus, real estate price increases will not be as fast as during the boom preceding the crisis. But for those who are looking for an opportunity for long-term investment, new opportunities are opening up in Dubai. It is only necessary to approach the selection of investment objects very carefully.
You can get any additional information about the acquisition and management of your property in Dubai from the specialists of IMEX Real Estate by tel. in Moscow +7 495 5100008, toll-free number in the UAE 800-IMEX (800-4639) or by sending a request by e-mail[email protected].
