Mini boom rekindles confidence in Dubai property market

The confidence that went on holiday following the crash of the sizzling Dubai property market is making a gradual return, as the market has seen a steady recovery in the last 12 months. Analysts note however that in spite of the recovery, prices are not yet back to the peak of 2008.

The latest data from Deutsche Bank note that prices and rents increased for the 16th consecutive month in March, showing that property prices went up by 1.5 percent compared with the previous month, with growth being seen across most areas.

The report adds that apartment prices are between 43 percent and 61 percent below peak and villa prices between 12 and 49 percent below peak, depending on location.

The story of the Dubai property market in the past couple of years has been an anti-climax with values hitting bottom-level and many investors getting their fingers burnt.

Many Nigerians invested massively in this market following the fabulous returns on investment that characterised the boom days of the market.

The Deutsche Bank analysts say that, on an annual basis, property prices have grown by 6.2 percent and the market is well on the way to recovery.

Sales were about 18 percent higher in the first quarter of 2013 compared with the year earlier, according to the latest report from Jones Lang LaSalle. The report also says that rentals have increased in the most sought after areas such as Burj Downtown, Dubai Marina and Palm Jumeirah, while remaining stable in secondary and less completed locations.

The firm is predicting that well established residential communities in central Dubai are expected to see further price and rental growth over the rest of 2013, but other areas will need more time before seeing increased demand and performance.

The latest REIDIN general Residential Sale Index shows apartment prices up 18 percent and villa prices up by 17 percent, but both are below peak values by 22 percent and 8 percent, respectively. Rent prices are also rising with the REIDIN Rental Indices showing a rise of 10 percent year-on-year.

Asteco’s 2013 first quarter report shows that apartment and villa rents rose by 3 percent and 4 percent compared with the fourth quarter of last year, while year-on-year growth amounted to 19 and 21 percent, respectively, while apartment prices increased by 12 percent and villa prices increased by 5 percent, adding up to an annual growth of 27 and 24 percent, respectively.

So, it is looking quite comfy for the market at present and this confidence has seeped into the development market with a number of new projects being announced in recent weeks.

There has been an increase in project launches by master developers such as Emaar, Nakheel and Damac.

Nakheel has restarted various projects while Emaar recently pre-sold four projects with over 1,000 units sold overnight, with prime units selling at a 40 percent premium to market prices.

Emaar has now announced another project in Downtown Dubai and Damac, the largest private developer of luxury real estate in the Middle East, announcing the launch of what it describes as the most luxurious golf community in the region.

The challenge will be to ensure that this confidence does not lead to undue exuberance. As the Jones Lang LaSalle analysis points out, an extended period of sustained growth is far more beneficial than a short period of unsustainable growth followed by an inevitable crash.