Yesterday morning on Business Breakfast I spoke about Dubai property prices and where they’re headed. With low mortgages, rising rents and strengthening demand it seems that all the levers are set in place for a property bounce back in Dubai.
Tenants who previously adopted a ‘wait and see’ attitude have increasingly begun to commit to buying property. This begs the questions: Do you want to be part of a potential real estate uptick? And how much will it cost you?
Since expats can only buy property in designated freehold areas, such as Arabian Ranches, Springs, Meadows, Emirates Living, Dubai Marina, JLT, JBR, Green Community, Greens, Discovery Gardens, Palm Jumeirah, Emirates Hills, International City, Dubai Sports City, Jumeirah Village, Jumeirah Park and Jumeirah Islands, I’ll focus on these.
Let’s first take a quick look at current rental prices.
According to property management company Asteco, rents in Q2 2012 have increased nine per cent for villas and six per cent for apartments. So average rents in Dubai are around for a studio are Dhs35,000 per annum, for a one-bedroom Dhs53,000, for a two-bedroom Dhs76,000 and for a three-bedroom Dhs122,000.
Apartments in Dubai Marina and Downtown Dubai are the most sought after, witnessing a 10 per cent increase, with a two-bedroom apartment fetching between Dhs90,000 and Dhs120,000 per annum. The most expensive place to rent is Palm Jumeirah where a two-bedroom can cost Dhs130,000, while at International City this is Dhs38,000, which is one of the cheapest.
With rents rising at this pace, you may be wise to start buying property. If you want to invest and are looking at pure-play returns, then judging an area on the basis of sale price increases may be best. Villas in Dubai and community-areas that offer quality, facilities and infrastructure are outperforming the property market. Take a look at their H1 performance: Arabian Ranches (16 per cent price increase), The Springs (14 per cent price increase) and Jumeirah Islands (11 per cent increase).
If you’re looking to live in the house you buy, you can splurge for a premium address at the Palm Jumeirah, which hosts the most expensive villas at Dhs17,200 per square metre, and where a five-bedroom villa can go for Dhs12 million. But for the most value, Jumeirah Village has the cheapest villas with stable prices at Dhs5,400 per square metre.
Since villas are between 6-8 per cent more expensive to buy now than they were the last quarter, you may want to live in an apartment. One-, two- and three-bedroom apartments in Downtown Dubai, Dubai Marina, and Palm Jumeirah are the most popular, having witnessed price increases of nine per cent, eight per cent and eight per cent respectively during H1 2012. Apartment prices elsewhere in Dubai remained relatively stable, while apartments in JBR saw a three per cent increase.
The most expensive areas are possibly Palm Jumeirah and DIFC (Dhs14,000 per square metre) and Downtown Dubai (Dhs12,900 per square metre), while some of the cheapest areas, after having fallen 22 per cent and 10 per cent respectively, are Discovery Gardens at Dhs4,300 and JLT at Dhs7,000.
Going forward, experts say that Dubai will continue to benefit from the Euro Crisis and Arab Spring. Villas and community-based, quality developments that offer facilities like retail, schools and hospitals will do well.
But remember that Dubai is a highly fragmented market, where only specific areas and even buildings will rise. On top of that, new supply is going to continue to enter, with residential stock due to increase 3.8 per cent in H2 2012 and 7.2 per cent in 2013, and office stock expected to increase 8.8 per cent in H2 2012 and 12.1 per cent in 2013.
Despite a definitive direction for property going forward, we’ve still come a far way from the 60 per cent drop in property value in 2008-09, so let’s enjoy this uptick and savour it for as long as it lasts.