Dubai’s residential property sector ended 2012 in a “buoyant fashion,” with both sales and leasing rates increasing in the year, according to the latest report released by property consultancy CBRE.
Residential rental rates in Dubai increased by 16 per cent during 2012, with average apartment lease rates rising 17 per cent year-on-year. Despite significant new villa supply in the market, lease rates for villas also grew 14 per cent year-on-year.
“After several years of sustained declines, renewed confidence has returned to the property sector, driven predominantly by increasing activity from cash investors,” the report said.
“The market is benefitting from recent government initiatives and renewed commitment to major infrastructure projects, which are seen to be acting as a catalyst to improving sentiment.
“Dubai continues to dominate the region as the major investment destination with its safe haven status firmly cemented,” it added.
In 2012, off-plan sales launches re-emerged in Dubai, with mixed fortunes for the developers, stated CBRE.
“Whilst the return of off-plan launches has so far been modest, a rise in speculative activity is clearly something to monitor closely over the coming year, particularly in light of recent regulatory changes,” the report added.
The UAE central bank recently announced plans to limit mortgages to expatriates and locals in the country. The new rules stated that mortgage lending would be restricted to 50 per cent of the property’s value for the first home to foreigners and to 70 per cent for nationals.
“With many local banks accused of over exposure to the property sector in the aftermath of the economic crisis, implementation of more stringent lending procedures would appear to be a reasonable response,” said CBRE.
However, although the move may reduce overall sales levels, the current market growth is being driven by cash investors rather than end-users, it said.
In 2012, Dubai’s mortgage market was estimated at 20 – 30 per cent of total residential transactions, reflecting high liquidity in the sector.
“This is a trend that is arguably more difficult to manage and control, at least without further regulation or the implementation of higher taxes and levies on property sales, it added.
Going ahead, the residential sector is forecast to continue its upward trend for sales and rental rates, although, because of the new regulations, 2013 is “unlikely” to match the performance of 2012, said CBRE.