Dubai residential property prices, rents expected to cool

The residential sector of Dubai’s real estate market has ended 2013 on a very strong note, with both prices and rents on the rise, supported by an extra boost from the Expo 2020 decision according to the fourth quarter of 2013 Dubai Real Estate Overview report by Jones Lang LaSalle.

The REIDIN Sale Index, which is privately managed, improved by 22% Y-o-Y as of November 2013, with apartments outperforming the villa sector in 2013. The apartment sale price index increased by 25% Y-o-Y but is 6% less than the peak of August 2008. The villa price index went up by 15% Y-o-Y and is 9% below its peak value. Over the year 2013, prices improved the most in Palm Jumeirah, International City and Jumeirah Lakes Towers.

On the leasing front, the REIDIN Rent Index went up by 17% Y-o-Y and 6% Q-o-Q. Apartments outperformed villas once again. The apartment rental index improved by 18% Y-o-Y but remains 14% lower than its record value of Q3-2008 while the villa rental index has reached its highest value since the creation of the index in January 2009 and has progressed by 13% Y-o-Y. Secondary locations have continued to recover and have outperformed some of the primary locations during the fourth quarter of 2013. As such, rental values have increased the most on a yearly basis in areas such as Sports City, International City, Silicon Oasis and JLT while the percentage growth was lower in prime locations such as Dubai Marina or the Palm Jumeirah.

The Dubai residential market ended the year 2013 with an increase in both rental values and sale prices across almost all areas. Success in securing Expo 2020 has further boosted sentiment that is causing rents and prices to increase at unsustainable levels. The rapid price growth, return of speculation and the dominance of cash buyers could translate into excessive price growth or over development that, if not managed carefully, could result in a bubble that would be harmful to the Dubai residential sector in the longer term.

JLL expectation is that while rents and prices will continue to increase during 2014, the rate of growth will decline from the levels witnessed during 2013.

Residential supply

At the end of 2013, the total residential stock in areas monitored by JLL stood at around 365,000 units, with over 9,700 residential units delivered throughout the year, 26% less than the number completed in 2012.

The last quarter of the year saw the handing over of around 950 residential units in the areas monitored by JLL. Most of the projects delivered in Q4 were outside Central Dubai and included the Whispering Pines villas in Jumeirah Golf Estates, Cappadocia residences and the Dana Tower in Jumeirah Village, the City Oasis in Silicon Oasis, in addition to a number of buildings and villa compounds in Dubai Sports City.

Burj Al Nujoom tower in Business Bay, right behind the Downtown Dubai, was also delivered in the fourth quarter of 2013. It comprises of roughly estimated 700 apartments.

If all monitored by JLL already announced projects are delivered on time, there would be around 28,000 additional units completed in 2014, representing an increase of approximately 8% over the current stock. In reality some of these projects are likely to be delayed beyond their scheduled completion dates. Dubailand accounts for almost 33% of the announced future supply, with around 16,000 residential units expected before the end of 2016. Other areas that should see major residential completions are Dubai Marina (4,200 units); Dubai Sports City (3,700 units); IMPZ (3,000 units); Business Bay (2,700 units) and Dubai Silicon Oasis (2,600 units).

The positive sentiment prevailing in Dubai, coupled with the economic growth and the anticipated increase in demand, have led a number of developers to announce pre-sales within large-scale developments. Among these projects are Al Furjan Villas, the Deira Project and Al Warsan Village by Nakheel, while Emaar has announced Burj Vista, The BLVD ,The Address Residences and The Opera District in Downtown, The Hills in Emirates Living and other projects in Arabian Ranches. DAMAC has also announced a number of projects in the pipeline such as AKOYA while Meydan and Meraas have also announced new residential projects in 2013.