Dubai Property Update

31/10/2014

The good people at Asteco Property Management have published their quarterly report on property in Dubai and it makes interesting reading. We are now almost a year on from the hype of the 2020 bid and the knock on effect that had on property prices and rents. What has happened and what is expected to happen to prices in the future?

Property purchase is one of the most popular subjects my clients want to discuss with me. Making an investment in the Dubai property market has had many winners and losers over the last decade or so with soaring peaks and deep troughs. The Asteco survey is the most comprehensive I have seen and I try and read it whenever it comes out as coming from one of the larger players in the property market this report should give us a good insight into what is happening to Dubai property, although we are not given details of the number of transactions which may skew the results.

The survey separates properties into sales which are further subdivided into offices, apartments and villas and rental rates which are also given the same sub-divisions. The best performing area for apartments in the last 12 months has been Jumeriah Lake Towers and Downtown Dubai, which are up 37% and 35% respectively, although over the quarter apartment sales values were down slightly. Villas dropped by 4% over the quarter which represents the first fall in value since the 2012 recovery but over the last 12 months prices are up between 3% (Jumeriah Islands) and 55% (Palm Jumeriah) across the 9 key areas monitored by Asteco where expats can buy.

The number of purchases made using a mortgage has increased from 30% to 40%, given the increase in property prices this may not be surprising however it could also indicate that more owner occupiers are buying property which should be good for the overall housing stock as owner occupiers tend to improve and maintain their properties better than tenants.

The new rules introduced at the beginning of this year by the Central Bank of UAE limiting the amount a person can borrow to buy a property requires an expat to have at least 25% of the purchase price as a deposit. When adding the other fees associated with property purchase such as estate agents fee (2%), mortgage broker fee (1%), mortgage application fee (1%), valuation fee, land department fees (4%++) which all add up to about another 10% of the purchase price, a total of about 35% of the purchase price which is quite an investment.

So the million dollar question, where are the prices going from here? Asteco believe that prices will ‘soften’ a little more as potential buyers are adopting a wait and see approach.

I hope that the above is interesting. Please let me know if you have any questions or comments.

One response to Dubai Property Update

  1. 

    Very interesting read. My own 2 bit says that the demand supply balance in dubai is impacted by a lot of factors which are unpredictable.

    One such as the prevailing conditions of MENA countries where theres conflicts.

    A lot of investors from those countries are attracted by the peace n stability offered here. So if something changes there, a lot changes here.

    Ive seen it time n again ( in trading biz) in all the years that ive been here. When iran iraq war ended dubai boomed. When Gulf war ended Dubai boomed. When USSR colapsed dubai boomed.

    So the general trend will be soft untill something major happens , in which case there could be a big surge as well