Pace of Dubai realty growth slackens, but more 'sustainable'

Dubai: With the pace of growth in property values recording another decline in the second quarter, Dubai’s real estate dynamic could be back into a more “sustainable” mode. According to Colliers International’s latest quarterly update on the local property market, value gains were limited to 3 per cent compared with the first quarter. In the first three months of the year, Dubai’s property values were up 5 per cent compared with a quarter before. “ The latest numbers also show that what the government had done to slow down growth rates has been working. ” Ian Albert, Regional Director at Colliers International If the current patterns hold up, “Overall growth through the year could be in the low teens and that’s a level the authorities, we believe, would be more comfortable with,” said Ian Albert, Regional Director at the specialist consultancy. “That would compare well with the 20 per cent annual gains in values Dubai has had recently, and that was way too quick for the price-sensitive buyer. The latest numbers also show that what the government had done to slow down growth rates has been working.” And where buyers are seeing value, they are willing to park their investments. The Motor City cluster has been a prime beneficiary of this trend during the latest quarter, “Yields on Motor City properties have gone up and that’s factor brought on by the mature of the location,” said Albert. “There’s been a lot of take-up in retail space there and with more facilities on-site investors have more reasons to decide in its favour.” In fact, across the city, value-for-money locations are commanding a lot of transactional interest. “The escalating rental costs in prime locations have led many tenants to relocate to more cost-effective locations such as Jumeirah Village, Dubai Sports City, Dubai Silicon Oasis and Discovery Gardens” the Colliers report states. “As tenant demand increased so has the attraction to investors with the overall impact being a consecutive increase in rents and sale prices in these areas. Motor City particularly, has seen increased activity”. Of the transactions tracked by the firm during the second quarter, Motor City recorded 7 per cent of the buys, the same as Business Bay. The pricier Dubai Marina had the highest number of transactions, at 14 per cent, while Downtown pulled in 10 per cent. Apartments in JLT made up 9 per cent. It is interesting that secondary market transactions held up their own during a period when off-plan sales hit a bit of a rough patch. “We saw a cooling off in the off-plan market over the last three to four months compared to the latter half of last year or even the initial part of this one,” said Niraj Masand of Banker M. E. “This can be attributed to several reasons including the rapid pace which the market took on in the last 12-18 months. Having said that, there doesn’t seem to be any fundamental reason for this state to continue — liquidity remains high and most developers have been reporting timely payments for subsequent instalments.”