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Mon 10 Feb 2014 12:44 PM

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Dubai property to reach 2008 peak "as early as this year"

Jones Lang LaSalle predicts continue growth in sale and rental prices to force market to 2008 peak within 18 months

Dubai property to reach 2008 peak "as early as this year"

Dubai property prices will return to their 2008 peak as early as this year, analysts Jones Lang LaSalle (JLL) said on Monday.

Sale prices will continue to grow in 2014 but not as fast as the 22 percent recorded last year, JLL head of research Middle East and Africa Craig Plumb said.

Rents also would continue on their upward trajectory and were expected to rise 10-20 percent, on top of the 17 percent recorded last year.

Plumb said some particular buildings in Dubai - those of high quality and in prime locations - already had reached the 2008 peak.

The overall market remained about 15 percent below 2008 levels but would return to those heights by the last quarter of 2014 or early 2015.

Prices had fallen by up to 60 percent following the global financial crisis.

Plumb does not expect the rapid price increases this time around to result in another bubble.

"There are some signs in the market of overheating," he said.

"Prices in 2013 in Dubai residential did increase at an unsustainable rate. When we look at 2014 we're expecting there to be continued price growth but not at the same level that we saw in 2013."

The market was more mature, while government regulatory changes, as well as greater cautions being taken by developers - such as phasing projects, working in collaboration and introducing measures to combat flipping - and banks would help to ward off a bubble, he said.

However he cautioned that the industry could not rely on the government to stabilise the market.

"There is a bit of a tendency in this market to say 'it will be all right because the government will regulate the market'," Plumb said.

"I think it's important for the real estate market to take some responsibility about that."

There also will be greater supply coming onto the market this year. About 27,000 units are due to be completed, although Plumb expects only about 20,000 to meet their targets.

He said financing would be more varied, with few initial public offerings (IPOs) and bonds, little bank financing and lower reliance on pre-sales.

Instead, developers would phases projects according to demand and build according to lessors' requirements and there would be increased "last mile financing", where an investor was sought during the final stage of a project before completion.

Western institutions would continue to show little interest in Dubai property, while investors from the Middle Eastern and global South would drive interest.

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Andrea 6 years ago

Ridiculous. The finishing of most properties is not worth the money in Dubai. What to expect when labours just get paid a AED 2000 a month or less. Nothing is working properly in Dubai. The infrastructure is boring and the whole city a big construction. The high prices in Dubai is not worth the money at all. Dubai is far not yet to compare with London, New York, Hong Kong or Tokyo. The next bubble is coming for sure cause people are not blind. Better be careful to not get ripped off in Dubai.

Heinz 6 years ago

i guess, this percentage for JLT is not realistic. the rent only has increased in 2013 from 58k to 75k... how many percent are those ?? and this is just a sample from myself. yes it is a prime location and i already got briefed, the rent is now already at 80k for same property and rising...

Garbo 6 years ago

The current residential market has not increased at an unsustainable rate?? What an unbelievable comment!! Of course it is increasing at an unsustainable rate - how do they think that the 80% of expats who are on average salaries and who underpin the whole market can sustain such year on year increases when annual wage increases are in the range of zero- 5%! They are pricing the very people that they rely on to drive the cities economic model out of the market and If this is not halted many people will need to reconsider if its worth staying. Short sighted short term greed!!

Faisal 6 years ago

Please introduce me to a labor who gets paid AED 2000 a month. I would be happy to see such a company!!

Sam 6 years ago

Andrea, I have never heard such rubbish in all my life. As long as you buy in established developments like Downtown or the Marina, I can't see anybody losing money over the next few years. The unrest in the broader region (which shows no sign of abating) continues to make Dubai an investment haven, as does its proximity to Africa. The predicted population growth figures alone, when compared against the likely supply of quality residential units in desirable areas, supports the proposition that property values in the best areas will continue to go up. The doubling of the transfer fee by the Land Department has also had a positive effect on the situation with flippers, as has the determination of developers like Emaar to restrict the activities of such people. Overall I am bullish about the Dubai property market, which I think is much more mature and sustainably managed than in 2008. I can't abide your pessimism Andrea, particularly when it is not backed up with any facts.