By Shane McGinley
Some areas see sales prices rise 75% in a year, with average rents up 20% - Asteco
With Dubai real estate house prices soaring by up to 75 percent in just one year in some areas and average rental rates rising 20 percent, a new report has warned some residents may soon be priced out of the market and will be forced to seek out more affordable communities.
Average apartment sales prices in Dubai rose 12 percent in the second quarter to June 2013 and rose 38 percent year-on-year, according to a new report by real estate consultancy firm Asteco.
However, prices in Discovery Gardens soared 75 percent in just one year, peaking at an average of AED7,550 ($2,055) per square metre and making it the fastest growing area in the city.
The Greens also saw prices increase dramatically, with prices soaring 44 percent in one year to AED12,400 per square metre. Downtown Dubai was crowned the most expensive area, with prices up 38 percent year-on-year to AED17,750 per square metre.
“H2 2013 has not witnessed any slowdown in transaction volumes, leasing or sales growth, while new project launches have become a weekly occurrence,” said John Stevens, managing director of Asteco Property Management.
Rental rates have also followed suit, with average apartment and villa up 20 percent and 17 percent respectively over the past 12 months. International City saw the biggest increase, where a lease for a two-bedroom unit increased 27 percent year-on-year to an average of AED42,500.
At the other end of the city, the popular expat community of Dubai Marina saw prices up 20 percent to an average of AED110,000 for a two-bedroom apartment.
With sale prices and rental levels both rising, Stevens warned “some residents will be priced out of established communities into less developed, more affordable areas.”
In the past, before the property crash and prices dropped by up to 60 percent, it was common for Dubai residents to opt to live in less expensive neighbourhoods in Sharjah. Stevens forecast this was likely to start happening again and prices will force some Dubai residents to “decide to relocate to more budget-friendly neighbouring emirates.”
Earlier this week, another report by global real estate firm Knight Frank found rental values in Dubai rose most in the past year than anywhere else in the world. The latest Knight Frank Prime Global Rental Index showed rents in the emirate increased by 18.3 percent in the year to March.
By contrast, the leading financial centres of Hong Kong, New York and London were some of the weakest performers, recording falls of 2.3 percent, 2.6 percent and 3.1 percent respectively.
On a regional basis, the Middle East saw the strongest rise in prime rents (up 13.1 percent) and North America the weakest (down 0.7 percent).
"Prime rents are rising strongly in many emerging markets, but this growth is being overshadowed by weakening rents in some of the world’s more established financial centres such as Hong Kong, New York and London," Knight Frank said in its report.
"Global mobility is on the rise as companies look to plug their skills gap but the latest figures suggest it is increasingly a west to east shift with many multinationals relocating a growing portion of their key talent to growth markets in Africa, China and the Middle East," it added.
I am a home owner and seen a (theoretical) dramatic increase in the value of my property since Sept 2012. This is unsustainable and actually bad for Dubai. Housing costs are becoming so expensive that it could potentially damage the short-medium term economy.
Inflation reports in the UAE are hugely under-estimated. House price increases, rents, food prices have all seen a steep increase over the last 12-18 months.
Dubai is becoming a very expensive place to live!.....and don't get me started on education costs ($16k per annum for a nursery place!?! More expensive than a US college education).
Love it here but worried that inflation will drive businesses to other regions or to consolidate.