A report by Jones Lang LaSalle shows that Dubai’s overall residential market is picking up, with average prices increasing 14% in the first nine months of 2012, largely due to an increase in villa prices.
The report, which cited data from REIDIN’s Residential Sale Indices, shows that villa prices in Dubai have risen 23% compared to same period last year, and are now 14% higher than in early 2008. However, apartment prices rose just 4% and are 18% less than their peak in the third quarter of 2008.
In addition, the villa rent index has increased 7% compared to the first nine months of 2012 and has now reached its highest level since the index started in 2009. Although it increased 5% this year, the apartment rental index remains 30% lower than its peak level in January 2009.
New, ambitious projects unveiled over the past couple of weeks are seen to have helped usher Dubai’s property market towards recovery. Three projects launched recently – Madinat Jumeirah, Mohammed bin Rachid City and the expansion of The Dubai Mall – are estimated to pump billions of dollars of investment over the next 10 years.
According to Jones Lang LaSalle, there are also clear signs that Dubai’s economy is recovering on the back of the three T’s: trade, transport and tourism. In addition, data from the Dubai Statistics Centre show that its GDP grew 4.1% over the first half of 2012 – the fastest since early 2008.
The global estate agent also added that there indications that lessons of the last real estate crisis have been learned. There is now a change in how Dubai approaches property development, which includes a greater degree of coordination between developers, adherence to the recently approved Strategic Planning framework for Dubai, and recognition that major developments will need to be built over a much longer timeframe and that major demand generators need to be developed ahead of other components of mixed-use projects.
‘It is now recognised that attractions and anchor tenants must be developed first, in order to generate demand for other components of the project,’ said the Jones Lang LaSalle report.
However, Jones Lang LaSalle’s soon-to-be-released 2012 Real Estate Investor Sentiment Survey shows that investors overall remain cautious, preferring completed income producing projects than development plays or land.
‘Given the understandable reluctance to rely so heavily on off-plan sales as in 2007-2008, the level of available finance is likely to act as a natural anchor, limiting the number and timing of the announced projects that proceed,’ the report said.