- City skyscrapers stand on the waterfront seen from a construction site of residential apartments on Palm Jumeirah artificial island in Dubai.
- Bloomberg News
A rebounding Dubai property market has caught everyone’s attention again.
Following a colossal crash in property prices in the wake of the financial crisis, not many had expected a recovery so soon afterwards, or so swiftly.
The total amount invested in the emirate’s property market in the first half was about 50 billion dirhams ($13.6 billion), equivalent to 44% of the 2013 total, property consultancy Knight Frank says, citing Dubai Land Department data.
So, just who is buying?
Indians were the biggest investors in the January to June period, spending nearly AED10.5 billion in the emirate, while British and Pakistani nationals pumped in AED5.8 billion and AED4.5 billion respectively.
From the Gulf region, Saudi investors were the top buyers of Dubai real estate worth AED3.4 billion. The Qataris meanwhile purchased AED1.5 billion worth of property, Kuwaitis AED839 million, Omanis AED482 million and Bahrainis AED247 million.
Knight Frank said Saudi investors have always shown keen interest in the U.A.E. property market due the strong economic conditions and buoyant labour markets there.
“With the introduction of higher transfer fees and mortgage caps, GCC nations perceive this increasingly regulated market as a safe haven for owners, tenants and landlords alike, so we expect a growth in demand in H2, especially in the mainstream residential market which is currently outperforming the prime segment,” Stefan Burch, general manager for Knight Frank KSA and Bahrain, said.
Knight Frank, in its Autumn 2014 Dubai Residential Insight Report, tries to address some questions about the market such as the reasons for the mainstream residential market outperforming the prime segment.
-Since the introduction of higher transfer fees and mortgage caps at the end of last year, annual residential price growth has been slowing in both the prime and mainstream segments.
-However, the new rules have impacted Dubai’s luxury homes market to a greater degree, with prices in 2Q rising by a relatively modest 6.3% on year, while the mainstream segment saw a 24% year-on-year increase.
-Established mainstream locations such as Dubai Marina remain popular among Western expats and continue to see healthy demand and thus price growth.
-Moreover, newer developments such as Jumeriah Village, Dubai Sports City and Dubai Silicon Oasis are seeing the same, albeit prices here are rising off a much lower base.
-With demand for residential property remaining strong in both newer, as well as more established mainstream locations in Dubai, prices in this segment continue to post strong gains.
-The new mortgage rules implemented by the U.A.E. Central Bank are stricter for those buying residential property worth over AED5 million. For example, if a first-time, expatriate buyer was to purchase a property above that value, they would need to raise a 35% deposit. By comparison, the same buyer looking for a property worth less than that amount would need a down payment of 25%.
-After halving between 2008 and 2010, both mainstream and luxury home prices have since largely reversed their previous falls.
-However, rents in the luxury segment haven’t kept pace, which unsurprisingly has led yields to harden.
-By comparison, as a result of a stronger recovery in rents, mainstreams yields continue to look relatively attractive to investors.
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