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.