Dubai villa prices up 19.9% in year, says Knight Frank

Prime Global Cities Index ranks Dubai villas market second in world for Q3 performance

The price of villas in Dubai has risen by 19.9 percent in the past year, according to the Knight Frank Prime Global Cities Index for the third quarter of 2012.

The global index, which rose by 1.1 percent in the three months to September down from 1.4 percent in the previous quarter, also showed that villa prices in Dubai rose 2.9 percent in Q3.

The price growth for the six months from March to September was recorded at 11.1 percent, making Dubai the second best performing market of the 26 cities tracked by the index, behind Jakarta.

Five cities recorded double-digit price growth in the year to September - Jakarta, Dubai, Miami, Nairobi and London.

"Cities such as Dubai, Miami, Nairobi and London are increasingly considered investment hubs for high net worth individuals (HNWIs) in their wider regions,"  Knight Frank said in the report.

"In the wake of the Arab Spring, Dubai has been seen as a relative safe haven for MENA buyers while Venezuelan and Brazilian investors have looked to Miami to limit their exposure to domestic political and economic volatility."

Property prices in Dubai soared after the city opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments.

From start-2007 to mid-2008, prices rallied almost 80 percent, Morgan Stanley estimates showed, with billions of dollars worth of new projects launched by local developers.

But home prices in Dubai suffered the biggest reversal seen in the Gulf property market as result of the financial crisis, declining on average 60 percent.

Fifteen of the 26 cities (58 percent) recorded flat or positive price growth in the year to September, but over the last quarter that increased to 20 of the 26 cities.

The index now stands 18.7 percent above its financial crisis low in Q2 2009 with Hong Kong, London and Beijing having been the strongest performers over this period, recording price growth of 52.9 percent, 45.4 percent and 39.5 percent respectively.

Cities in Europe remained the weakest performers, recording a fall of 0.5 percent on average in the last 12 months, the index showed.

In Paris, although prices held firm in the third quarter, sales activity was muted as buyers of all nationalities adopted a “wait and see” attitude.

Knight Frank said vendors are unwilling to reduce prices until there is greater clarity from President Hollande and the Eurozone leaders in relation to the debt crisis.

"Asia’s prime markets look to be entering a period of more moderate growth due in part to the regulatory measures aimed at cooling prices and improving domestic affordability," the report added.

James Price of Knight Frank’s International Residential Development team said: “Aside from London, it would appear the other strong performers are either those established international markets that experienced a lull but are now ‘kicking on’ again (such as Miami, Dubai) or those that could be described as second tier international cities – strong established markets, but not global ‘gateway’ cities (Zurich, Vienna, San Francisco), where interest has driven price rises from a lower base.”

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Posted by: realiste

another day, another story in Real Estate Dubai-style.
Still, this keeps some firms busy I suppose, trying to bump up prices.

Reality below in another AB article.

"More distressed assets in Dubai now than downturn - Tasweek "

There are more cut price real estate assets available in Dubai now than during the worst of the downturn in 2009, as developers and owners seeking to offload units accept losses in order to close a sale, a real estate executive claimed.

Posted by: Tony

the max avg appreciation is no more that 5% and this too could go back to zero if the global economic climate remains down.. The upside buying a home in rural Michigan sounds a better bet than Dubai

Posted by: desert dream

All the action is by the broker set. There is barely any end user demand. Also there is a huge pipeline of villas in JVC and JVT. Again its all speculation as what we saw in the Emaar launches. I would not get too excited about it but if i was a real end user i have no choice but to buy the property at the inflated price (so a broker can walk away with 100k + after putting his deposit chq!) If there is any weakness in the world economy through 2013 then prices can get hit again, however if it strengthens then huge amount of broker and developer activity will start in dubai.

Posted by: RaOne

KF...have you every heard about dead cat bounce... or double dips?

Instead of cheering again, give investors well researched materials. Dubai has too many under-construct villas.

Posted by: Navin

It is such fun to read reader comments they sometimes out do the article itself! This article like most others on Dubai real estate by AB recently is spot on with some qualification like the location and desirability of the property but these 20% gains made by smart investors who were not waiting for the positive reports to come in but moved in on gut feel will most likely not be repeated by those who came in late! but Dubai offers the best value for money in the region even at the 2008+20% price level.

Posted by: Wildwine

@Navin, sorry, it was not personal. My point was that 35% capital gain in 01 year is still very steep for real estate, add to that your rental income; works out to circa 40%.

Posted by: Navin

@Jake; hey this is getting personal now! in any case let me explain my position, i happen to buy to live not to flip and i did not buy expecting to make a profit immediately but because it seemed the prices had hit bottom, but if this 35% becomes a 75% in a year or so and i feel the market is again showing signs of dementia then the profit will be worthwhile to relocate to a rented accommodation again till the next time around! there is always a chance that the market would go south but then i never bought with the intent to make a killing and the rent saving will justify the purchase :)

Posted by: Wildwine

@Navin, out of curiosity; 35% and you still want to hold, aren't you greedy then??
I am talking 35% return on investment (irrespective of base price).

Posted by: Navin

@wildwine; well i recollect those surreal times very well i had friends cancelling bookings at Springs and preferring to lose their Dhs. 5000 deposits rather than continue and taking people to Emmar offices where Meadows villa's were available for Dhs. 1.1 Million (which now sell for 4 Mil) with them letting it pass despite having the money and people who did not get greedy or got into the flipping mode did not lose! 35% is too much or too little depending on what is the base price you buy!!

Posted by: Wildwine

@Navin, If I recall correct nobody was laughing at Dubai real estate in 2005; on the contrary everybody was onto real estate since since 2005. So please don't try to project yourself as one who read the market so well so as to give credibility to your statement. Nobody read the market, that was a fact, everybody bought on hunch and some got lucky whilst most were not.
If you made money well good on you.
Don't you think 35% (assuming it is in 01 year) is rising too fast? Easy mortgage availability yes; but what percentage of current population is actively seeking mortgages (given uncertainty in the market).
Yes the market will recover; but it will be gradual; anyway in most mature markets real estate is a long term investment (i.e. at least 5 years +).

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