Dubai Real Estate Market – Q2 2015 by Roots Land

Property Watch

The increasingly diversified economy of the UAE is expected to continue expanding for a sixth consecutive year in 2015, with gross domestic product (GDP) forecast to grow at a rate of 4.5%.

The real estate sector was in 2014 the third most important sector of in the economy, accounting for 13.3% of GDP. Travel and tourism contributed 8.4% of the UAE’s GDP, a figure that is expected to grow by 5.1% this year. The sector generated 307,000 jobs, and jobs growth in travel and tourism of 5.4% is forecast for 2015.

The Government of Dubai strongly contributes to the expansion of the travel and tourism industry, backing major; developments including th new Al Maktoum International Airport and the extension of Dubai International Airport.

Dubai’s population continues to expand, growing by 5% to 3.8 million UAE nationals and expatriates by the middle of this year. These figures underline the healthiness of the labour market. The annual inflation rate currently stands at 4.3%, lower than the 4.6% rate forecast for this year.

Apartment prices slip

The Dubai property market softened during the second quarter of 2015, with average apartment sales prices across the city falling to the same level as in the first quarter of 2014. This is a consequence of the rapid escalation of prices over the past two years. By 2013, average sales prices had recovered to levels last seen in 2008 at the peak of the property boom. Prices continued to climb, reaching a new high in the third quarter of 2014. Prices stabilized at that point, then started to decline.

The correction comes as less of a surprise when analyzing the volume of transactions, which did not keep pace with sales price growth but instead rose at a slower rate from the first quarter of 2013. Demand declined slightly in the first quarter of 2014 and rather more steeply in the second quarter of that year (see Figure 1). The gap between the two curves was the first indication of a future correction.

The annual inflation rate for the Consumer Price Index was 3.4% in 2014 and it expected to increase to 4.6% this year, according to Dubai Statistics Centre. This negatively impacts the purchasing power of residents, including property buyers, who will not see their wages increase by the same amount.

Top 3 communities Q2 2015 – Number of transactions

International City
International City
Dubai Marina
Dubai Marina
Dubai Sports City
Dubai Sports City
Dubai Apartment Sales Transactions
Dubai Apartment Sales Transactions – Figure 1

Prime area apartments

Average sales prices in Business Bay have risen gradually over the past few years while demand has remained constant. During the last quarter of 2014 and at the start of 2015 the number of transactions recorded by Dubai Land Department increased sharply, then declined sharply before settling back to regular long-term average volume (see Figure 2).

Dubai Business Bay Sales Transactions
Dubai Business Bay Sales Transactions – Figure 2

 

In terms of supply, the district currently has more than 40 developments currently under construction by various developers, the majority of which are expected to be handed over to their owners in 2016 and 2017 (see Figure 3). Additional developments are currently in the planning stage and should soon be available at off-plan market.

The volume of transactions in Downtown Dubai rose until the first quarter of 2014. During the second quarter, there was a marked slowdown leading to an inevitable fall in sales prices.

Average sale prices moved in line with the overall market, rising to a new high in the third quarter of 2014 before starting their decline. As of the second quarter of 2015, prices were 19% lower than at the 2014 peak. During the second quarter of this year, demand has been steady and at a healthy level.

Sales prices in Dubai Marina and Jumeirah Beach Residence (JBR) also rose to new highs in the fourth quarter of 2014, recovering from previous lows reached during the global economic downturn. However, the transaction volume trend is somewhat different with demand starting to decline from the first quarter of 2013 before steepening again in the first half of 2014. Now, in second quarter of 2015, average sales prices are declining with buyers’ interest picking up (see Figure 5).

Palm Jumeirah sales prices have moved in line with the general trend across the city. However, demand has fallen faster than in other areas with sales transaction volumes declining since the second quarter of 2013. In the second quarter of 2015, prices are 12.5% lower than at 2014 peak. However, there have been a number of off-plan transactions in Palm Jumeirah that were not included in the graph below. There are 20 projects currently are under development on the island with more at planning stage.

Residential & Hospitality Supply - Figure 3
Residential & Hospitality Supply – Figure 3
Downtown Dubai Sales Transactions
Downtown Dubai Sales Transactions – Figure 4
Dubai Marina & JBR Sales Transactions
Dubai Marina & JBR Sales Transactions – Figure 5
Palm Jumeirah Sales Transactions
Palm Jumeirah Sales Transactions – Figure 6

Villas

This is the third quarter of falling sales prices. In June, average prices in the Dubai villa segment were similar to those of April 2013 (see Figure 7). The bullish market of 2012 lead to the high expectations from home owners regarding selling price and rental return, and high interest from buyers looking for an investment property or for a new home. From the second quarter of 2013, sales rates continued their rapid increase as demand started to fall. However, since the beginning of 2015, buyers’ sentiment has strengthened, prices have continued to fall and, as a result, the number of transactions recorded in the villa segment has started to rise again.

Top 3 communities – Number of transactions

The Springs & The Meadows, Dubai
The Springs & The Meadows, Dubai
Arabian Ranches, Dubai
Arabian Ranches, Dubai
Jumeirah Park, Dubai
Jumeirah Park, Dubai
Villa Sales Transactions
Villa Sales Transactions – Figure 7

Prime areas – Villas

Following the general trend across the emirate, the volume of transactions of prime villas in high-end developments within the Jumeirah Park, Jumeirah Islands, Emirates Hills and Arabian Ranches communities has kept increasing since late 2014.
Prices in the first three areas declined in the second quarter, while sales prices at Arabian Ranches’ rose by 5% (see Figures 8-11).

Arabian Ranches (high end) Sales Transactions
Arabian Ranches (high end) Sales Transactions – Figure 8
Jumeirah Islands Sales Transactions
Jumeirah Islands Sales Transactions – Figure 9
Emirates Hills Sales Transactions
Emirates Hills Sales Transactions – Figure 10
Palm Jumeirah Sales Transactions
Palm Jumeirah Sales Transactions – Figure 11

Among these prime communities, Arabian Ranches supply is the highest with more than 4,000 villas. The community is also the fastest growing. By 2018 Emaar, the developer, will deliver nearly 2,500 new homes including the Mira Oasis, Lila, Azalea and Samara Rosa, and Rasha Villas sites (see Figure 12).

Villa Supply High End Areas
Villa Supply High End Areas – Figure 12

Estelle Risse
Reasearch Analyst, Roots Land Real Estate
research@rootsland.com

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