ValuStrat sees moderate growth for Dubai property sector as investors push apartment prices up

Overall property market shows resilience, ahead of activity and buyer sentiment in last quarter of 2014

Dubai, United Arab Emirates; September 2014 – The real estate unit of valuation experts ValuStrat sees moderate growth for Dubai’s property sector as transaction data from the Dubai Land Department (DLD) show apartment prices per sqft rose by 27.2% to AED1,390 as of August 2014, compared to the same period last year.

ValuStrat’s real estate report, released ahead of next week’s Cityscape Global event, also showed a significant rise in prices studio units (with sizes of 700 sqft or less), by as much as 36.2% to AED1,112 year-on-year (YoY).

According to Declan King, MRICS MSCSI, Director & Group Head – Real Estate, ValuStrat, an analysis of these statistics suggests “Dubai’s real estate appetite for apartments was particularly heightened during the property market recovery phase, likely due to apartments offering lower ticket entry prices and attractive rental yields.”

With regards to the very strong YoY performance by studio units, King notes “this displays how in a rising market the highest percentage gains are often seen by lower priced variants, such as studios – As both investors & owner occupiers become priced out of larger alternatives and target smaller more affordable properties in their chase for deals & attractive rental yields.”

It is noteworthy that during the period under analysis upward pressure on rents was especially strong in smaller studio properties – contributing towards their increased focus from investors.

Meanwhile, the volume of registered apartment transactions proved reasonably resilient during the period – dropping 4.8%YoY (as at August ’14). ValuStrat observe that these DLD transaction statistics are yet to include the high volume of off plan apartment sell outs sales witnessed since market recovery late 2012 “as most of these apartments will only be counted in official figures after handover over the next few years,” King added.

However, the decline in transaction numbers also suggests that measures to cool the market, such as increased DLD transaction fees and revised LTV mortgage criteria, are having their desired effect – particularly on Dubai’s secondary property market. ValuStrat anticipate that the above rates of YoY price increases will moderate over the remainder of the year.
“It will be very interesting to see how purchaser demand holds up during the 4th quarter and what happens with secondary market prices and off plan new home launches – Particularly in medium price ranges. The statistics from the last few months of the year will be particularly important when we look back at year end,” explained King.

Moving forward, King sees a moderate growth in the last quarter of the year for Dubai’s property market, when new data will show current buyer sentiment which will in turn reflect on transactional activities that will be registered with the DLD. King says Cityscape will set the tone for the real estate market over the remainder of the year. “It will be valuable to see what type of buyer sentiment is displayed after the summer lull & how bookings fare for new launches made at the event,’ he continued.

ValuStrat is a leading consultancy firm based in Dubai, but operating throughout the Middle East. It provides sector-focused reports as part of its services, which also include management consulting, business development strategy, and asset valuation.