CBRE cautions over new Dubai property boom

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Dubai’s resurgent housing market needs to be monitored more carefully as residents start to feel the effects of a rising cost of living, a property consultant warned on Thursday.

In its latest report, CBRE argued that if new supply and further regulations are not added to the market, Dubai’s “competitiveness as a burgeoning global business environment” could be affected.

The firm also warned that the return to the market of speculator activity, and the consequent rise in prices, could be “a little ahead of reality”. 

“The residential sector has maintained positive momentum amidst solid market fundamentals and steady economic growth,” the company said in its latest research note. “However, there is a modicum of concern that the recent escalation of sales and leasing rates could actually be a little ahead of reality."

CBRE pointed out that while sales volumes had grown by 30 percent in the first quarter year-on-year, figures had actually dropped since the last quarter of 2012.

Transactions dropped by 24 percent quarter-on-quarter, while the overall value of properties sold fell by 17 percent.

The firm said that 60 percent of all sales had taken place in well-established locations, such as the Marina, Emirates Hills, the Palm Jumeirah and Downtown Dubai. Rents of two-bedroom units in these locations rose by 27 percent year-on-year.

The highest rise was seen in the Greens, where rents rose by 40 percent in the last twelve months.

Average villa prices rose by almost 5 percent in the first quarter, with smaller villas registering much higher growth.

In the office market, which has been oversupplied ever since the financial crisis rocked Dubai in 2009, CBRE reported “growing demand” for commercial space. It said that prime rents in the CBD had risen by 4 percent on quarter-on-quarter, while there was evidence of rental growth for selected areas in Jumeirah Lakes Towers, Business Bay and TECOM.

Dubai has seen a slew of new megaprojects announced in recent months, including the giant Mohammed Bin Rashid (MBR) City, a mixed-use development located in Dubailand. It will include the world's biggest shopping mall, more than 100 hotels, a Universal Studios franchise and a public park larger than Hyde Park.

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Posted by: desert dream

I disagree here. The market in on an upswing and prices will go up everyday. The world economy is recovering, especially the US, so now there is no question of a debt or mortgage crisis. Anyways banks are very tight on lending so most of the transactions are on cash. Dubai is well positioned to become a leading city of the world at par with London and NY if not better in the next 5 years.

Posted by: Jake

How I missed this tune. You can't be the busiest, if you still have to overtake someone. Your Airport is busy, not bad. One job well done. But how do you compare the infrastructure of a tiny state like Dubai with the one of an entire country 100 times its size. I have seen the big announcements, we had these before and a trip along Emirates Road will show you how that that ended. Putting up nicely rendered pictures is one thing, delivering another. I am certain the RE sector will do well the next 2-3 years, no doubt. The regional turmoil brings plenty of cash from questionable characters to Dubai and if we put our head into the sand, easy over here, we can pretend that this is a healthy real estate market.

Posted by: desert dream

Hi Jake,
In infrastructure, Dubai is already no. 1 - the airport is the busiest in the world, set to overtake Heathrow. Emirates is the No.1 airline in the world, their growth in the Indian market will benefit dubai. Highways and bridges are coming up everyday to support the population growth in dubai. The latest endeavour regarding Tourism is outstanding - there will be a huge number of visitors for Dubai Safari alone, besides the other attractions outlined. I personally feel the Real Estate market will do well in the next 2-3 years, at current levels, demand far outstrips supply. There is an immediate need for villas and high end apartments. Pls note the Mira launch - that is some serious appetite for Dubai property.

Posted by: Jake

You had to wait 5 years before you could storm this section again with your Dubai>NY and Dubai>London comments. Glad you see Dubai being the leading City in near future. But leading in what exactly and whom and where?

Posted by: John Smith

People have short memories and greed makes them make rash decisions. We saw the same thing in 2006-2008.
People buying to let will find it vey difficult to get tennants. The population here is not exploding, tourists are not beating down the doors to come to Dubai. Safe haven status from turmoil in the middle east I agree with, short term transit, cruise, conference customers maybe. This is a slow recovery and I would caution anyone to take their time, wait till projects are delivered, and look at the fundementals underpinning your decision. When the Arab sovereign wealth funds invest in property where do they buy?

Posted by: AW.

CBRE is right. Greed is back and is not healthy. However, the data of 24% fall in transactions & 17% fall in volumes is misleading. End of Dec 2012, UAE Central Bank announced restrictions on mortgages for expats which left property & banking industry in shock. For first 45 days of Q1 2013, Buyers, Sellers, Brokers, Bankers paused. Market picked up after Central Bank agreed to review these restrictions. Developers announced more projects with renewed gusto and market forgot about Central Bank. Remember Mira launch?

Q2 2013 will definitely look better than Q1 2013. However, I don?t expect prices & volumes to show a steep rise in Q2 2013 v/s Q4 2012. That?s owing to chinese whisper?s that sellers are backing out of deals anticipating sharp rise in the asking prices.

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