Downtown Dubai was one of the top performers in prime residential market last year
While the prime residential property market saw a drop in values last year, a trend that investors are keenly observing, the market is also winning new buyers, especially from fast-emerging international markets. The prime residential market last year totalled Dh39 billion, down by around 11 per cent compared with the previous year, according to research by Luxhabitat based on data from Property Monitor. While noting that homebuyers will continue to wield the upper hand this year, Andrew Cleator, sales director at Luxhabitat, said there are strong signs the market is picking up activity. “In my opinion, 2019 will continue to be a buyer’s market with great opportunities for both investors and end users alike,” said Cleator, adding that price reductions have already started to wane with some areas showing signs of stabilising.
Last year, Dubai’s prime property prices also saw the fifth-highest decline among 43 major cities around the world according to Knight Frank’s Prime Global Cities Index Q3 2018. Dubai recorded a drop of 3.8 per cent year to date, which was the second highest decline in the region after Istanbul, which saw a 6.3 per cent drop in prime property prices.
“The decline in sales prices is of concern to some investors depending on when they entered the market,” Ivana Vucinic, head of valuations and advisory operations at Chestertons Middle East and North Africa, told Property Weekly. “But conversely it is attracting new buyers to the market because of increased affordability. Moreover, we are not just witnessing interest from investors but from end users as well.”
Optimism in the market
According to analysis by Luxhabitat, new buying trends in the past year indicate a growing optimism in the market. These trends include an increase in the average price per square foot for villas, which indicates interest for higher-end and better-quality units. Luxhabitat also reported that demand for ready-to-move-in villas has doubled.
“Arabian Ranches 2 seems to be a popular area, with a 47 per cent increase in sales from the previous year, presumably owing to more launches in 2018,” Luxhabitat said in the report.
Last year the most popular prime residential locations in terms of sales volume were Business Bay (Dh6.9 billion), MBR City (Dh6.3 billion), Downtown Dubai (Dh5.4 billion), Dubai Marina (Dh3.7 billion) and Palm Jumeirah (Dh3.3 billion), according to Luxhabitat.
But a key shift in buyer interest was seen in the size of units transacted. “It is deduced that the average size of off-plan units transacted has also reduced from an average built-up area of 1,100 sq ft to 917 sq ft, [a drop of] 6.2 per cent,” according to the report.
With the broad easing of business regulations and visa rules, particularly those related to property such as the introduction of the retirement visa for those who own property worth at least Dh2 million, there is now much more clarity for many buyers who had earlier adopted a wait-and-see approach, said Taimur Khan, senior analyst at Knight Frank. This is likely to underpin the market moving forward, although he believes it will take time to make an impact.
While prevailing prices and generally favourable to buyers, Mario Volpi, sales and leasing manager at Engel & Völkers Dubai, underlined the
opportunities that have opened for investors.
“Dubai is regarded as one of the most sought-after cities in the world to own real estate, given its proven high return on investment. The continued strength of the dollar has, however, meant that some real estate in the emirate is perceived as expensive; the truth is actually the reverse,” Volpi told Property Weekly.
According to the 2018 Knight Frank Wealth Report, $1 million (Dh3.67 million) would buy 138 sq m of prime property in Dubai, but only 25 sq m in New York, 28 sq m in London, 39 sq m in Singapore, 56 sq m in Paris and 92 sq m in Mumbai.
“The softening of prime property prices and the fact that one gets much more property for their money adds to the attractiveness of Dubai,” said Volpi. “Property markets move in cycles and given the statistics, most analysts believe we are close to the bottom of this particular cycle, so buying real estate now or in the very near future looks to be a good move especially with Expo 2020 just around the corner.”
All rights reserved to the initial publisher for gulfnews.com