Fortune 5 Real Estate is pleased to offer you an update on Dubai’s property market pricing and trends emerging from the Q1 results of 2015.
Here we go again, has Dubai’s famous property market finally peaked?
Last year, the government stepped in to curb speculative buying that has since had a lasting impact with higher prices now affecting demand. The United Arab Emirates central bank imposed caps on mortgage loans, and Dubai doubled its transaction fee on property deals. On top of this, uncertainty and stagnant growth in the Euro zone and a sharp decline in Russia has investors hesitant to jump head first into short-term asset investments. The remaining buyers, end users are becoming patient and looking for a good value deal.
What goes up must come down. It’s about that time and Dubai has eventually reached the falling phase of its cycle. Since 2008-2009 the UAE recovery saw some of the worlds most rapid residential asset growth. However this time around the curve back down is expected to not be as steep. Q1 of 2015 has shown us precisely that.
Across the emirate prices are declining as vacancies and inventory rise and demand softens. As the summer heat approaches, unfortunately real estate should expect to remain chilled.
Old Town has been used as the benchmark for this report since it is an exclusive area by Emaar and has some of downtown’s most desirable locations as well as common areas and amenities. Sale prices in all downtown apartments are depreciating with figures showing an average decline of 6.2% over the past 12 months including a drop of 1.01% during Q1 of 2015.
Old Town (south side of Mohammad Bin Rashid Blvd):
There were 28 sale transactions in Old Town during Q1 of 2015. Average pricing per square foot is subjective due to many options in locations, floor plans and views.
Rent prices in Old Town are slowing as well and remain at near same levels as last year.
Average asking rent for 1 bed is 120,000 AED per year (approx. 6-7% yield)
Average asking rent for 2 bed is 170,000 AED per year (approx. 4-5% yield)
Financial stocks in the DFM Index are feeling the pinch as well and are down 6.2 percent in the last month. This makes for a 23 percent fall over the past year. As a result, many developers have decreased the volume of launches for new projects since many investors are now cautious and fearful of global markets as well.
However, all this news is not necessarily indicative of a full on crash. Dubai’s fundamentals still remain positive. The emirate had a 4.5 percent GDP growth last year, and a 6.5 percent rise in employment. Brookings Institution ranked the emirate as one of the world’s five fastest growing economies. Also to be considered is Expo 2020. Now just 5 years away it includes more planned infrastructure, residential projects and jobs anticipated as helping to grow the emirate.
With all things considered, Dubai is undergoing a gradual maturity in its real estate market for the first time since freehold was born over 10 years ago. Assumption now is to expect prices to continue to drawdown until demand picks back up towards the end of 2015. Also, keep a close eye on stock markets around the globe as this has potential to change investor sentiment rapidly for the short to medium term.
For more information about Old Town – Downtown Dubai, please visit www.fortune5.com or
Contact us at E: email@example.com | P: 04 448 8555