Weekly Dubai real estate news digest. Issue 77

21.12.2014
Radical changes on horizon 
Welcome to the seventy-seventh 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 77 |  December 21, 2014

Radical changes on horizon 

As the year comes to an end, it is apparent that things have changed in the UAE's real estate sector. While the beginning of 2014 marked a period of skyrocketing rents and increased attention from investors, 2015 has far more sombre forecasts.

"It is apparent that we have entered a “new normal” in the investment landscape," says Sameer Lakhani, managing director, Global Capital Partners. "The structure of returns for the coming year is likely to come from cashflow yields rather than asset returns. Investors have to adjust their expectations to this new normal, or risk being disappointed as they chase trends to their ruin."


Firstly, with at least 20,000 new residential units that will be added to the supply of houses, there is bound to be an impact on sales and rental rates. According to the global real estate consultancy CBRE, the increased supply will have a deflationary impact. Moreover, research from Cluttons shows that villa prices in Dubai will also continue to go down in 2015 with the cap on mortgage lending to home buyers being the biggest factor in the slowdown.

Secondly, the UAE's property market will be impacted by the dramatic fall in oil prices. In fact, according to Peter Cooper, editor, ArabianMoney.net, the UAE will be in a recession next year. However, he is quick to point out that this will be different from 2008 with the UAE putting a brake on the housing boom. He notes that despite the recession, the UAE will "remain in demand as a safe haven." 

Market Insight is aimed at examining the emirate's dynamic market and forecasting industry trends. The next year promises interesting changes in the UAE's rental market and is an important year for shaping the direction the country's economy is heading in. While the UAE may see some fluctuations with declining oil prices, “the property market here has reached a situation similar to London’s … overseas investors buy in for the safe haven environment,” says Nicholas Maclean, managing director, CBRE Middle East. New market players have to be cautious about the change in the playing field. Armed with that knowledge, they are bound to be rewarded in the upcoming year of change. 

Sincerely,

Pashma Manglani

Editor


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Dubai, world's hottest realty market

Dubai remains top of the chart of the world's best performing markets for seven consecutive quarters.

According to the Global Property Guide, Dubai’s real estate market is the only one in the world that has seen over 140 nationalities investing in it. 

Property price increases have, however, decelerated to an average of 23.73% during the year to Q3 2014, down from annual increases of 33.26% in Q2 2014 and 31.57% in Q1 2014. House prices dropped 1.13% during the third quarter, the company said which tracks prices in 39 global cities.

 

Read more on Emirates 24/7

Prime property prices set to fall

Prices of prime property in Dubai is forecast to fall by up to 10% during 2015 but growing interest from Indian buyers will cushion the declines, according to a new report by Knight Frank.

Knight Frank’s Prime Global Cities Forecast said that luxury residential markets face a diverse range of challenges and opportunities in 2015. 

Of the eight cities included in its forecast, Dubai sits at the bottom but even here prime prices are only expected to slip by 5-10%. 

 

Read more on Arabian Business

Slide in villa prices to continue into next year

Villa prices in Dubai will continue to soften into next year with the cap on mortgage lending to home buyers the biggest factor behind the slowdown, according to research from Cluttons.

“Almost a year after the introduction of the federal mortgage cap, the residential market appears to have finally succumbed to the stringent deposit requirements imposed on buyers,” the broker said in its Dubai Winter 2014 Residential Market Outlook.

Villa values went down 1.2% in the third quarter as compared to the previous three months. 

 

Read more on The National

'Investment landscape sees radical changes'

As the year comes to an end, the investment landscape in Dubai looks decidedly different with more sombre forecasts, says Sameer Lakhani, managing director, Global Capital Partners.

He pointed out that while in the beginning of 2014, prices were going higher and higher, things are about to change. "With job creation remaining robust in the local economy, housing demand is expected to remain strong. But perhaps for the first time since the advent of freehold, projects are being forced to cater to the median income resident, rather than the holiday home phenomenon for the upper-income segment."

According to him, there is now a 'new normal' in the investment landscape where the focus is soon to shift to cashflow yields rather than asset returns.

 

Read more on Gulf News

'More supply to cause fall in rents'

With at least 20,000 new residential units likely to be added to the existing supply of houses in Dubai in 2015, CBRE, a global real estate consultancy, believes the supply could have a deflationary impact on sales and rental rates. 

“The residential segment has experienced a period of relative stability during H2 2014, with rental rates remaining broadly flat. Over 20,000 new units are expected to enter the market during the course of the next 12 months which could have a deflationary impact on sales and rental rates,” Mat Green, head of Research and Consultancy UAE, CBRE Middle East, said in a new report.

The good news, however, is that overall rents in Dubai remained 'broadly flat' in 2014, registering only a 7% increase compared with a 24% rise in 2013.


Read more on Emirates 24/7

Rising demand for office space drives up rents

A shortage of prime office space in Dubai, which is being underpinned by robust demand, has translated into strong upward pressure on rents across the city, and a rapidly diminishing supply of Grade A space in more centrally located submarkets and freezones, according to the latest research from international real estate consultancy, Cluttons.

Cluttons' Dubai Winter 2014 Commercial Market Outlook report, shows that during the third quarter of 2014, rents for prime office space reached AED250 psf, which represents a near 14% rise on Q1 and a 25% increase on the same time last year. In the secondary market, strong business activity is fuelling the demand for high quality space, with rents rising by 44% over the past 12 months to reach an average of AED130 psf.


Read more on Zawya

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