Weekly Dubai real estate news digest. Issue 17

27.10.2013
    Dubai recovery picks up speed
Welcome to the seventeenth issue of Market Insight, your weekly guide to what's happening in the Dubai real estate market.
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MARKET INSIGHT. Weekly guide to Dubai's property scene
Issue 17 |  October 27, 2013

Dubai recovery picks up speed

Property prices in Dubai have been inching upwards during all of 2013. As a result, the housing and utility component of the consumer price index (CPI) - which accounts for 44% of overall inflation - has gone up by 2.9%. 

With rentals becoming more expensive, buyers and renters have turned to more affordable locations, such as Dubailand and Dubai Sports City. The third quarter report of propertyfinder.ae revealed that these areas are where most new developments will be taking place. Two bedroom apartments in Dubailand range from Dhs60,000 to Dhs80,000 per annum as compared to Dhs70,000 and Dhs100,000 for those in Sports City.

Ever since the market has begun its recovery, industry experts have been split down the middle on the impact this will have on the economy. However, US-based investment bank Goldman Sachs Group recently commented that fears on Dubai's market experiencing a bubble are "exaggerated." According to the report, new regulations from the Dubai Land Department are doing the job on curbing speculation while new supply is helping keep values down. 

New realty rules are also helping banks contain property risks, according to Fitch Ratings. The agency said that the doubling of property registrations fees and planned caps for mortgage lending help ensure that banks have enough capital to fall back on when required. 

In other news, the commercial sector has also been faring well in the emirate. The amount of office space is set to increase by more than a fifth next year and according to property consultants Knight Frank, this is bound to prevent any steep increases in rents. Dubai International Financial Centre authorities have already ruled out an increase in office rentals.


Market Insight is aimed at examining the emirate's dynamic market and forecasting industry trends. Prices for properties in the emirate are on a steady increase, but most experts believe the growth is more contained this time around (especially as a result of Dubai's regulatory measures). We hope our round-up of key stories and expert opinions have helped pinpoint latest developments and popular projects. We'll be following up on the hottest new properties and be sure to update you on the latest realty news. 
 

Sincerely,

Pashma Manglani

Editor


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Property bubble fears exaggerated: Report


Fears of Dubai's real estate market experiencing a bubble are "exaggerated," Goldman Sachs Group said in a report on Monday.

"New regulations from the Dubai Land Department are aimed at curbing speculation, while new supply is helping keep values down," the US-based investment bank said.

Property prices are 36% below their 2008 peak even after rising by about a third from a low in the second quarter of 2011, bank analysts added.

 

Read more on Emirates 24/7


Dubailand, Sports City increasingly popular 


Rising rents and prices of residential apartments in established communities with access to Sheikh Zayed Road are making areas like Dubailand and Dubai Sports City more popular among renters and buyers.

The third quarter report of propertyfinder.ae states that the largest proportion of future stock is expected to be delivered in Dubailand and Dubai Sports City (DSC).

The number of people searching for apartments in DSC has risen significantly and the community has jumped positions to take 11th position on the website's most searched rental communities' list. DSC was in 18th position for the same period last year. 

Two-bedroom apartments in Dubailand are currently being leased for Dhs60,000-Dhs80,000 per annum, while lease rates are between Dhs70,000 and Dhs100,000 pa in DSC. In comparison, rents in upmarket Downtown Dubai range between Dhs140,000 and Dhs350,000 pa. 
The industry view is that secondary locations are improving due to the affordability factor. 
 

Read more on Emirates 24/7


Inflation creeps up amid rising property prices
 

The housing and utility component of the consumer price index (CPI), which accounts for 44% of overall inflation, grew 2.9% compared to the same month last year, according to data released by the Dubai Statistics Centre.

Property prices edged 0.1% higher from August.

Until last month, the average price increase in the component in the year to August was just 0.3%. September's pickup helped to fuel a rise in headline inflation. On an annual basis, prices rose 1.9% while on a monthly basis, they went up by 0.1%. Economists have said that the marginal rise in housing costs this year has been out of sync with the rapid increase in rent prices. 

Rental rates for mid-range villas and apartments have accelerated by 20 to 30% in the first nine months of the year, compared to the year before. 

 

Read more on The National


20% more office space by 2014


The amount of office space in Dubai is set to increase by more than a fifth next year as developers bank on a recovery in the emirate's commercial property market.

According to property consultant Knight Frank, office stock will go up from 8.4 million square metres to 10.2 million sq metres by the end of 2014.

Knight Frank predicted that the expected surge in new office space would prevent any steep increases in rents. In a report, the consultancy said rents for Dubai's most prestigious office buildings could edge up slightly next year, from an average of Dhs1,600 per sq metre to about Dhs1,700 after remaining flat for the past two years.

 

Read more on The National


DIFC says no to rent hikes 


Dubai International Financial Centre (DIFC) has ruled out an increase in office rentals.

"We haven't increased the rents in DIFC for the past three years. We are not going to increase the rentals in Dubai right now as we don't see rents going up in other areas that we compete with," said Brett Schafer, chief executive officer, DIFC Properties.

He pointed out that DIFC isn't competing with other office buildings in the emirate but rather with financial centres such as London, Tokyo and Singapore. "The rentals aren't going up in those markets and so we are not increasing our rents. We still offer good value compared to our competitors," he added. 


Read more on Emirates 24/7


'Open mortgage market to non-residents'


While the UAE Central Bank mulls tightening up mortgage financing norms, a senior industry official has now come up with a contrarian view.

Ziad Al Chaar, Damac Properties' managing director, wants local banks to help finance local property transactions done by non-residents.

"I believe banks remain too timid - what we need is a practical and pragmatic non-resident mortgage. Dubai will then be able to attract more people genuinely interested in owning property in Dubai - but they can only do that through a proper mortgage."

"Not everybody can come straight into the market with $1 million and buy property with cash. One of the most important factors which is still holding the market back and has not yet been recognised is the lack of mortgages," he added.


Read more on Gulf News


Unlicensed agents still active


Even as Dubai enjoys its latest property boom, some unlawful practices continue within the industry.

"The recent recovery has unfortunately attracted an increasing number of so called 'agents' who are neither qualified through the Dubai Real Estate Institute nor registered with RERA (Real Estate Regulatory Authority) yet are still active," said Mohanad Al Wadiya of Harbor Real Estate. "This unfortunate development has been on the increase as market activity has flourished."

"One very disappointing aspect is that some agencies are hiring unlicensed agents or agreeing to deal with them. Sometimes the industry is its own worse enemy."

All agents have to be duly credited with the concerned agencies but instances of buyers or tenants getting duped on payments and cheques still make the regular rounds of the property market. 

Read more on Gulf News


New realty rules reduce risks for banks 


The doubling of property registration fees in Dubai to limit speculative buying, reinforced by planned caps for mortgage lending, could help contain property risk for UAE banks as the real estate sector recovers, Fitch Ratings has said in a report.

The ratings agency lauds the measures taken by the UAE Central Bank to ensure that banks have enough capital to fall back on when required.

The new 4% fee should help property prices recover at more sustainable levels in Dubai, the agency maintains.


Read more on Emirates 24/7


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