Sharp fall in rents expected. Weekly Dubai real estate news digest. Issue 86

Sharp fall in rents expected
Welcome to the eighty-sixth issue of Market Insight, your weekly guide to what's happening in the Dubai real estate market.
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MARKET INSIGHT. Weekly guide to Dubai's property scene
Issue 86 |  February 22, 2015

Sharp fall in rents expected

Home values surged 56% in the two years through 2013, but it's clear that now, the market is set to undergo a period of falling rents and prices.  

The UAE government took steps to introduce measures that would help the market control itself in order to prevent a repeat of the 2008 crash. These regulations are now begin to take effect, coupled with falling oil prices and changes in global currency valuations. 

“They did the right thing and it had the desired effect because 2013 was pretty ridiculous in terms of price growth,” said Richard Paul, director of U.A.E. residential valuations at Cluttons in Dubai. “Landlords need to lower prices and buyers need to save for deposits. That can easily take 18 months to three years and we may see a subdued market.”
Property prices in Dubai's secondary market are expected to soften this year, according to a Standard & Poor's Ratings Services report. However, the consultancy notes that this is a 'cool-down' of the market rather than a crash similar to 2008. The Reidin Housing Market Sentiment Index Survey found similar results, saying it expects a decline in the first quarter of this year. 

Now, another factor that is bound to affect the property sector is that buyers from European countries are spending less because their currencies have declined against the dirham. In the past six months, the British pound lost about 8% against the dollar, the euro declined 15% and the Russian ruble slumped 42%.

Market Insight is aimed at examining the emirate's dynamic market and forecasting industry trends. Experts are cautioning industry players about changes that are bound to occur. It is apparent that the real estate sector is going to see a slow-down in terms of prices and rents. However, most analysts agree that this is welcome, bringing relief to the rapid growth that occurred in 2013. In fact, the falling prices is a good sign, Lenet Asatourian, a broker at ERE Homes, was quoted as saying. "This year, we're getting more inquiries than we did in the past six months and we have an equal number of buyers and sellers... To me, that signals a maturing market."


Pashma Manglani


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Palm Jumeirah stays ever-popular

The Palm has long-been a haven for attracting investors and this hasn't changed even with growth slowing down across the city.

Muraba Properties, which is developing a decidedly premium apartment block there, has confirmed that more than 25% of the 46 units have been snapped up since they were offered in January. “You certainly don’t see the wealthy not buying new cars, watches or taking a vacation,” said Ebrahim Al Ghurair, founder of Muraba Properties, for whom this is his first real estate venture in an individual capacity. “There’s this same attitude when it comes to buying property on the Palm.”

The master-developer Nakheel has been keeping the Palm pipeline busy with its own projects, including those launched at Cityscape last September. 


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'Property prices softening'

Property prices in Dubai’s secondary market are expected to soften this year. However, the market correction isn't expected to be reminiscent of 2009, according to Standard and Poor’s Ratings Services.

“We project a softening in residential real estate prices this year, particularly in the secondary market, given our expectations for an economic slowdown and deteriorating investor sentiment, which will cool demand,” the ratings agency said in its 'UAE banks are well-positioned to face a tougher 2015' report.


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Rents set to fall: Survey

A number of global real estate consultancies have predicted rents to fall in 2015, but the Reidin Housing Market Sentiment Index Survey expects the decline in the first quarter itself.

Emirates 24/7 reported that the index result shows that sentiment of rental price is ‘moderately negative’, but the rental volume is ‘moderately positive’ for the first quarter, which means rental transactions will be more compared to the previous quarter.


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'Lack of trust still prevalent for off-plan purchases'

Even five years after the financial crisis, buyers in Dubai are wary of off-plan property purchases, according to Construction Week Online.

A biennial survey recently published by Dubai-based law firm Hadef & Partners called The Legal State of The Dubai Property Market found that 84% of respondents (of which there were more than 1,000) said they favoured investing in completed schemes over off-plan sales, with only 15% expressing a preference for off-plan.

For those that were happy to invest off-plan, around 87% restricted their choice to a master developer, such as Emaar, Nakheel or Dubai Properties.

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Currency woes set to affect realty market 

Buyers from European countries are now spending less because their currencies have declined against the dirham, Bloomberg reported.

Falling oil prices and a tax on foreign property held by Indians are also pushing down home values in the emirate. A year ago, Dubai regulators took steps to cool a market where home values had been climbing at the fastest pace in the world.

S&P predicts a price drop of 10% to 20% this year, according to Franck Delage, associate director of corporate ratings for Europe, the Middle East and Africa. 

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Living Legends project to be ready by Q2

Living Legends, a much-delayed luxury residential project in Dubai, will begin delivering its first units this year, its developer, Tanmiyat Global, confirmed to Gulf Business News.

The first 150 villas will be handed over in the second half of 2015, with the overall project also “on track” for completion in 2016, a statement said.

The development, located in Dubailand, will comprise 500 villas and 12 apartment towers, along with a community club house, shopping mall, boutique hotel, schools, clinics, and a nine-hole golf course, all spread across over 14 million sq ft.

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