Weekly Dubai real estate news digest. Issue 62

A stabilising effect 
Welcome to the sixty-second 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 62 |  September 7, 2014

A stabilising effect 

While Dubai may be back on track with its development, there is no doubt that the emirate has taken a different approach to growth this time around.

Prior to the recession, master developers funded their large-scale projects by relying on small-scale developers and investors with limited experience and track record. This resulted in much of the property 'flipping,' attributed as being the main cause of the market crash.  However, now, major projects are being announced as part of landowner-developer deals - thus ensuring credibility. Deepak Jain, regional director, head of strategic consulting, JLL MENA, stresses that this change in attitude on the part of developers (focusing on partnerships rather than just selling) is a marked difference from the time before the recession.

Experts across the board had raised concerns about unsustainable prices once the market began picking up in 2013. However, measures put in place by the authorities have had a cooling down effect on the market, reducing growth in sale and rental values, as per JLL's recent Dubai Q2 Market Report. 

In fact, there has been a decline in rents in freehold communities across the emirate. Downtown Dubai has seen a decrease of between 6-7% in rents, with studios now available for about AED65,000-AED75,000 per annum (pa). Meanwhile, International City, Discovery Gardens and Remraam have also seen a fall in rents of about 7-12%. 

When it comes to villas, research from property consultancy Phidar Advisory shows that while prices for single-family homes rose steadily over the first half of the year, provisional figures for the six weeks to August 15 showed that they fell 4%. "The Dubai residential price correction now under way is a sign of early detection relative to the last cycle," said Jesse Downs, Phidar Advisory managing director. "[We] predict prices will decline in the second half of 2014, but this should be considered a price correction in respond to exuberant speculation building over the past two years."

Market Insight is aimed at examining the emirate's dynamic market and forecasting industry trends. It is clear the confidence has been restored in Dubai's property sector, what with Emaar Properties announcing its initial public offering of its malls unit for October (the largest share sale in the UAE). It is also apparent that unlike before the financial downturn, developers are taking a closer look at how to meet the needs of the market rather than focusing all their attention on making a quick sale. With rents falling, the sector appears to be undergoing a stabilising phase, bound to help the market grow in a more sustainable fashion. 


Pashma Manglani


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Rents fall in freehold communities 

Rents are either falling or holding steady in Dubai’s freehold communities, reveals the latest update of Real Estate Regulatory Agency’s (Rera) rental index.

Downtown Dubai is witnessing rental declines across all categories of apartments – studios, one- and two-bed units. Studio rates are down 6.25% to 7.14%, as per the final index update with rents ranging between AED65,000 and AED75,000 per annum (pa).

Meanwhile, while rents for one- and two-bed apartments in Dubai Marina remained stable at AED90,000 to AED120,000 pa and AED140,000 to AED170,000 pa, studio rents have come down by between 6.67 and 8.33%. 

Dubai’s ‘affordable communities’ are also witnessing a decline in rents. Rents for studio apartments in International City dropped by 12.5% to AED20,000 to AED35,000 pa, while two-bed units saw a fall of 8.33% with lease rates between AED45,000 and AED55,000 pa. In Discovery Gardens, studio rents dropped by 10% to Dh40,000 - AED45,000 pa, while lease rates for one-beds declined between 7 - 8.5%. In Remraam, studio lease rates fell between 11 and 12.5% to AED35,000 to AED40,000 pa.

There was no change in rents across Business Bay, Jumeirah Lakes Towers, and Dubai Silicon Oasis.


Read more on Emirates 24/7

Demand soars for sustainable developments

Sustainability is set to take centre stage for developers.
In fact, Emaar's community management programme will be at the forefront of sustainable developments on show at Cityscape Global next month with more residents expressing their desire to adopt a greener lifestyle.

A recent poll conducted by Bayt.com showed that 72.5% of respondents considered going green as something very important to their lifestyle, with 80% also stating that environmental issues and conservation of natural resources concerned them "to a large extent".

Sameer Kulkarni, director of Emaar Community Management said: "Sustainable principles, strategies and practices are fundamental to how we maintain our communities. Some of our initiatives include a drive to remove invasive Damas trees, an edutainment event for younger residents, as well as campaigns and community projects to conserve water and energy. These efforts are complemented by our focus on renewable energy initiatives, recycling and waste management."


Read more on Zawya

Emaar IPO injects confidence in regional markets

Emaar Properties has set the initial public offering of its malls business in Dubai for October in what could be the largest share sale in the UAE since the financial crisis, said the Financial Times.

Emaar Properties, whose developments include The Dubai Mall and Burj Khalifa,  said on Sunday that it expected to list at least 15% of its malls business in the offering, which was first announced in May. 
The sale reflects a resurgence of investor interest in Dubai. A successful IPO could encourage other firms to follow and would be a further boon for the UAE.

The Dubai Financial Market General Index closed at 5,062.97 points on Sunday, up 135 points, or 2.73% over last week’s close at 4,928.22 points. This marks the first time the Dubai benchmark index has breached the 5,000-mark after hitting a six-year-high in April this year. 


Read more on Financial Times

Price correction under way

Property brokers are warning that villa prices in Dubai could be starting to fall as new mortgage caps subdue the market for multi-million-dirham homes, The National reported.

Brokers say that the new laws which come into effect at the end of December, are forcing buyers to rethink their decision, causing a drop in prices of villas at a time when scores more are being built. 

According to research from the property consultancy Phidar Advisory, prices for single-family homes in Dubai rose steadily over the first half of the year, but provisional figures for the six weeks to August 15 showed that they fell 4%.

Read more on The National

Mega projects back, but take realistic approach

Development activity has returned to Dubai in full swing but there are some clear-cut differences between large-scale projects before and after the financial crisis, says Deepak Jain, regional director, head of strategic consulting, JLL MENA. 

In an article in Gulf News, Jain says, "Before the global financial crisis of 2008-09, there was undue reliance on land sales to fund large-scale projects which required master-developers to rely on small-scale developers and investors with limited experience and track record. This was one of the main reasons the Dubai property market suffered as these investors would buy land by putting a minimal down payment then sell off-plan property based on a concept design and use the proceeds to buy more land instead of investing in the project."

However, Jain points out that recently, the developers of large-scale projects are reluctant to sell land as a means of cross-funding development. "Slowly but surely developers and investors are realising the importance of land, particularly in Dubai, and are more interested in setting up joint ventures rather than selling."

Read more on Gulf News

New luxury building on the Palm 

A new luxury residential building will soon be built at the entrance of the Palm Jumeirah, Emirates 24/7 reports.

Drake & Scull International and Dubai-based developer Omniyat have entered into a partnership to build the project, designed by internationally renowned architects Soma from New York, Super Potato from Japan and Vladimir from Lebanon. One at Palm Jumeirah, the project, will debut at the forthcoming Cityscape Global. 

The enabling works are due to commence within the next two months, according to a joint statement issued by the companies. The building will offer 360-degree views, with apartment sizes ranging from 2,500 to 20,000 square feet.


Read more on Emirates 24/7

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