By Claire Ferris-Lay
But Asteco warns release of fresh supply in 2012 could spur new fall in rents, prices
Dubai’s real estate market held steady for a fourth consecutive quarter in a sign the Gulf’s worst-performing property sector is showing signs of recovery, said real estate consultancy Asteco.
Rental rates for apartments in prime and midmarket locations stabilised in the fourth quarter, with Nakheel’s International City the only project to see a small slide in lease rates.
“Transactions levels are rising as job security and increased market confidence results in people seeking tenancy upgrades and home ownership,” said Elaine Jones, CEO of Asteco.
The company has seen “an increased number of new people relocating to the emirate as a result of the general life in business performance,” Jones said.
The consultancy also saw increased interest from buyers in other Arab countries seeking safe haven investments amid the region’s political upheaval.
The average rental cost for one and two-bedroom apartments in Dubai Marina were AED62,500 and AED80,000 in the fourth quarter, unchanged from the previous three-month period.
On Dubai’s Palm Jumeirah, a year’s lease for a one-bedroom apartment was unchanged from the previous quarter at AED90,000, said Asteco.
In Nakheel’s International City, annual rents fell to AED23,000 for a one-bedroom apartment, a decline of two percent.
In Discovery Gardens, which saw a 10 percent price slide in the third quarter as Nakheel released new units to the market at rents that undercut owners, leases held steady at AED38,000 a year.
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. Between 2007 and mid-2008 prices in the emirate rallied almost 80 percent, according to Morgan Stanley.
But home prices in Dubai, the Gulf property market that had the biggest reversal because of the financial crisis, fell more than 60 percent in the wake of the global credit crunch.
The value of real estate sales in Dubai in the first ten months of 2011 were down 85 percent compared to the same period in 2008, Land Department data shows.
The city saw less than 1,700 real estate deals in the first ten months of the year, a 70 percent decline on sales made at the housing market’s peak.
The release of some 10,700 new apartments and 1,300 villas to the market in 2012 could spur a minor fall in sales prices for apartments and villas, said Asteco.
Properties in poorly-maintained projects are likely to be worst-hit as tenants upgrade to newer developments, the report said.
“Apartment and villa rents are seen steady in 2012 with minor declines for low quality and poorly managed buildings in certain areas,” analysts wrote. Transactions are expected to remain high as further supply enters the market leading to more price competition for owners and more choice for tenants.”
Once again the supply figures are all wrong.
Most of the projects are delayed and the delivery will be staggered .
The resultant sporadic supply will be readily absorbed by a population that is increasing at 5% or 100,000 per annum.
There is no doubt the number of transactions has sharply increased in recent weeks . You can see a number of people driving around Emirates Living, Ranches , Palm and Jumeirah Islands, scouting for properties . All this is reminescent of late 2007 scenario. Obviously the cooler weather helps.
Lower interest rates, additional liquidity from European and US Central Banks, safe haven status and bargain commercial rents attracting new businesses, will soon lead to demand exceeding supply . Thus driving prices up.
For example 100 businesses each are being setup in International City and JLT each month . Consequently , shops in IC that were going abegging earlier this year are now fully occupied .As a result even the apartments are now back in demand.
Birdie do you just make stuff up, source for information "cooler weather" "people driving around" and you now count you transactions all very scientific .And the best of all 100,000 property buyer's per annum arriving ready to buy. The line ups of purchasers must be long perhaps even blocking traffic.
Procan, your comment is the one which makes no sense. Birdie said the increase in population of 100,000 would "absorb" the new supply, he did not say "purchase". By absorb Birdie could have said "occupy" if that helps you. Most of these 100,000 will be renters, not buyers, but that's ok because most of the units which will be completed in the next year have already been purchased. I am one of those who will spend time driving around in this "cooler weather" looking at property versus driving around in the hot summer months. Does that not make sense to you? I agree with Birdie that demand will exceed supply but only in some parts of Dubai. I sold a Victory Heights villa more than a year ago. In the last 60 days the idiot real estate companies who did not delete my listing have been ringing begging me to sell. Obviously Victory Heights is heating up but there is limited quantity available for sale...hmm?
I live in prime Jumeirah 1/2 borders. I walk my dogs every night and see more and more villas with "for let" signs - and not just the ones where landlords have not done any maintenance years, good properties.
These places would have been snapped up a year ago and now they are vacant for longer and longer. This story simply doesn't ring true.
Your comment does make sense, but that of a very optimistic ex-investor anxiously looking at soon restarting his favourite pastime in Dubai (investing AED100,000/- to make AED 1M in 15 days).
That aint gonna happen anytime soon. A number of people drive around Burj Khalifa also in cooler weather. That doesn't mean they are planning to rent or buy in that building. In fact what would you say about Jumeirah Open beach? Drivers are no indicators to end-user count. The statements like market 'heating' up, transactions 'sharply' increasing are full of 'weasel' words - words used commonly by authors to incline readers towards accepting their opinions as facts.
Continued from previous:
The contention that Dubai population will grow by 5% or 100k per annum is highly misplaced. You are using the difference between 2006 census and the recent announcement that Dubai has now over 2M people. Well, both yardsticks are wrong. Between 2006 and 2008 population grew exceptionally. But now the growth rate is slower. In fact go to Dubai Statistics centre website, the population growth (projected) within 2011 based on their figures will only be 65,000 people. And the population of Dubai is 'still' not showing as 2 million.
Lastly, of these 65k or 100k people, how many will land up in just two enclaves: Sonapore or Al Quoz. And how many will land up 1X10 in Deira and Bur Dubai apartments because Metro and Buses were planned keeping only certain people in mind. I hope demand rising out of remaining 1000 odd people will be able to exceed the supply of 10,700 apartments. Dont know about 1,300 villas. Maybe European liquidity will be a one-way phenomenon.
People who are trying to talk the market up are in cloud cuckoo land and are just publicising their own self interests. 100 buisinesses setting up each month , what utter waffle .
Have a look at the world news at what's happening in Europe and the U.S . We could be heading for a double dip and people are talking about 2007 here , unbelievable .
Im afraid those days are well and truly gone . Qatar and the K.S.A are the ones that will see the rise . In my opinion Dubai is a far better place to live now then it was in 2007 and will be even better in 2015 . Let the natural progression take place , you can't beat the market people and don't kid yourself otherwise
I looked at property on the Palm, the agent said more people are looking, but they are not biting.
I spoke to an agent in Downtown (my building) he said it is slow, the prices are stable, however if you look out of my buidling, starting March there are several buildings that will start to be delivered, I look out the back and see they will shortly complete the access from Business Bay to Downtown and there is a lot of property being completed that side of the fence.
I dont know what the percentage increase in new properties will be, but it does look a lot.
So I will stick to the old property investment theory "dont buy until supply dries up and (repeat and) rent is rising"
to follow up on my previous post, I just drove from MOE to Sports City...I looked at the construction..wow...it was like looking at one of those phantom Chinese cities....rows upon rows upon rows of villas being completed...not to mention the high rise
Agree, yet another case of a real estate egent trying to talk up the market.
If the claims of '100 new businesses set up every month' and a '100.000 net addition' to population every year. Then please explain why the city only saw 1700 real estate deals in the first 10 months of 2011. So we have 2 million pop city with 1700 housing transactions and we are supposed to believe that the gung-ho of 2007 is just around the corner?