Real estate experts expect the prices of properties surrounding the Dubai Tram, such as those in Dubai Marina and Jumeirah Beach Residence (JBR), to growth over time but not in the short term.
The Dubai Tram, which will be formally launched this evening but begin passenger services tomorrow, covers major residential and commercial areas between Dubai Marina and Sufouh.
Real estate firms expect the new transport network to drive prices in surrounding areas, but it could take a year to tell the impact of the tramline on property, as with the metro, said Nick Maclean, managing director of CBRE, Middle East.
“Even if it does not have a direct impact on the pricing, it will have an impact of the attractiveness of the housing units close to the tram stations. In the event of tram launching, we had a look at how the opening of train stations and other infrastructure projects affect the property market elsewhere in the world. At the moment we see an increase of 20 per cent in pricing.”
Maclean expects properties within walking distance from the tram stations are likely to see price increases, due to improved mobility and connectivity for residents, a notion supported by Faisal Durrani, international research and business development manager, Cluttons.
“We expect that the Dubai Tram stations dotted around the Marina will similarly drive demand up in their immediate vicinity,” he said, highlighting that tenants were already actively seeking to be close to Marina’s two metro stations, The Beach and JBR.
An earlier report by real estate agency Chestertons forecast that properties in areas around the tram could see valuation increase almost 150 per cent following the launch.
But other firms dismiss these claims, suggesting an overnight increase is less likely.
“The overall residential market is running out of steam following a period of rapid sales price growth,” said Craig Plumb, head of research at JLL, MENA.
“We do not expect prices to increase overnight as a result of the tram. Rather than resulting in a major spike in prices or rentals, the Dubai Tram is more likely to reduce the time taken to lease or sell units – which in turn will provide higher returns for investors in projects located in short walking distance.
“The impact will definitely be more notable in respect of residential units – with little or no real impact on office rentals,” added Plumb.
In recent months, most parts of Dubai Marina have been plagued with heavy traffic, especially where the tram intersects road crossings. But these congestion issues will not drive down demand in the area, experts predict.
“The current traffic congestion is largely a result of the construction and should ease over time as more of the temporary road closures are re-opened,” said Plumb. “The tram will of course also help reduce future traffic by allowing more visitors to use public transport.”
Maclean also believes that residents and commercial enterprises frustrated with the construction work going on within the Marina may look again once the tram becomes operational
“Once the tram is operational, there will be minor inconvenience where the tram line crosses the road but I think the overall impact if going to be positive.”
TAKING AFTER DUBAI METRO
Despite a positive outlook for real estate projects in the proximity of the tram, if the impact is similar to that of the Dubai Metro, price increases could be much slower.
“The experience of the Dubai metro was more gradual rather than sudden as the market is impacted by many different factors, with public transport being just one,” said Plumb.
“As the metro has gained increasing usage, there is now a premium associated with rentals and sale prices for those projects within easy walking distance compared to other projects within locations such as Dubai Marina and JLT.
“The impact of the tram is likely to level out prices within the Marina as more projects will now be within easy reach of public transport.”
Initial hype surrounding the metro did not translate into growth in property values, according to CBRE’s Maclean, but this has changed with demand picking up in areas easily accessible by public transport.
“Now we have some key clients who specifically want to be within walking distance of the metro,” he said. “So it has become a very important transport infrastructure in Dubai and we see people paying more for locations closer to the metro than further away. It is very difficult to put a figure on how much impact it has because there are other aspects that people are looking at when choosing a property to make a contribution to the price.”
But even with forecasts of gradual growth in tram linked areas, real estate agents suggest a connected public transport linking communities together across Dubai should be the overall goal.
“The key now to unlocking the true potential of public transport is to stitch together all of Dubai’s communities in a cohesive and sustainable way, which makes getting around easy,” said Durrani.
“There are the obvious challenges of putting infrastructure into established parts of the city, but for somewhere like Downtown Dubai where values have risen by five per cent to Dhs1940 ($530) per square feet this year, excluding the Burj Khalifa, we can easily see transport linked premiums rising exponentially, once all our communities are linked together.
“While the Dubai Metro transformed access across Dubai, this was an exceptionally successful macro solution to an acute problem, but the challenge now is creating an integrated and accessible world class city that is pedestrian friendly and the benefits to real estate values will follow naturally.”