DUBAI- The second quarter of this year saw a continuation of the slowdown in Q1 2014 residential sales performance for Dubai with the market witnessing marginal growth, up 6% and 3% respectively for apartments and villas in Q2 2014; but the latest market report from Asteco anticipates renewed interest and activity in Q3 2014.
H1 2014 activity was marked by sector stabilisation and consolidation as the market continued to absorb the rapid growth witnessed in 2013. According to the Asteco Dubai Q2 2014 report, interest shifted to peripheral communities such as Jumeirah Village, Dubai Sports City and Dubai Silicon Oasis, as many prospective purchasers remained priced out of the more popular areas of the city such as Downtown Dubai and Dubai Marina.
“We recorded positive growth rates of around 10% in Q2 for these areas, but at the same time there was a decline in interest in the previously popular affordable communities of Discovery Gardens and International City, which only registered minimal growth, indicating that they are now topping out price-wise and any further growth will take them out of the affordable bracket,” said John Stevens, Managing Director, Asteco.
Stevens also noted that sellers who raised their prices following the Expo 2020 announcement are intent on maintaining their position, which has resulted in a reduction in transaction levels, especially for higher priced properties within established communities.
A raft of recent new launches, including Dubai Properties Group projects such as Manazel Al Khor in Culture Village, Rahat Villas at Mudon, and 200 new units at Remraam, have joined a growing list of announcements with Damac also launching its NAIA Hotel and Hotel Apartments, 34 premium Fendi Villas at Akoya Drive, and two hotel apartments at Jumeirah Village.
Emaar also continued its string of new launches with Opera Grand, the first residential development in the Opera District at Downtown Dubai, and Danube’s inaugural UAE project, the 171-townhouse Dreamz community at Al Furjan.
In terms of apartment sales, the top performers in Q2 2014 were Downtown Dubai and Jumeirah Beach Residence, both up by 11% to AED 3,300 and AED 2,000 per square foot respectively while Dubai Marina and Downtown Dubai led year-on-year growth at 62% and 52% respectively. Jumeirah Village also showed 46% year-on-year growth with an increase of AED 300 to touch AED 1,100 per square foot. In comparison properties in Dubai Silicon Oasis and Dubai Sports City are currently changing hands for AED 800 per square foot.
The communities leading villa sales were Victory Heights and Palm Jumeirah, with an impressive 8% and more moderate 3% increase, taking the per square foot sales price to a ceiling of AED 1,450 and AED 4,000 respectively. Palm Jumeirah recorded a laudable 55% increase over the last 12 months while the newer Al Furjan community jumped by 44% with properties now selling at AED 1,200 per square foot.
The rental market was dominated largely by demand from new arrivals into Dubai, with apartment rates increasing by 4% in Q2 and villas by 5% with modest growth of up to 10% witnessed across Dubai.
“With rents increasing steadily since 2013, many existing tenants have elected to remain where they are and absorb the rent increase, as indicated by the RERA rental index, rather than start from scratch and incur the cost of moving, agent commissions etc.,” said Stevens.
Apartment rental rates grew most during Q2 2014 in Jumeirah Beach Residence where the annual rental rate for a two-bedroom unit increased by 10% boosted by the release of the Al Bateen Residences.
International City recorded the highest annual growth at 66% with a two-bedroom apartment currently leasing for up to AED 70,000 while Jumeirah Lakes Towers rose by 54% year-on-year, to reach AED 150,000 for a two bedroom apartment.
Villa rental rates grew by 5%, on average, in Q2 with the popular Jumeirah location witnessing the highest growth of 12% (40% year-on-year). Jumeirah Village saw an 11% increase in Q2 (20% year-on-year) due to its affordable positioning, with a three-bedroom townhouse typically achieving rates from AED 155,000 to AED 185,000 per annum.
Compared with Q1 2014, office leasing in Dubai was relatively slow in Q2, with Dubai Investment Park and Dubai Internet City the areas most in demand, with an overall market average rental rate increase of just 2%.
Office sales flat-lined in Q2, however, a major transaction was concluded by Dubai’s first real estate investment trust, (REIT) with the AED 600 million-plus purchase of more than 15 vacant office floors in Index Tower, at DIFC.
Asteco predicts an increase in enquiries and transactions post summer, supported by ongoing economic improvements and activity on the part of companies budgeting for the year ahead, and those expanding or relocating and in the market.
“We expect the main beneficiaries of this increase in demand to be the quality single-owned office buildings in prime business locations such as DIFC, Sheikh Zayed Road and Dubai Media & Internet City,” noted Stevens.