“Dramatic price fall in Dubai’s real estate sector left everyone stunned”
Whenever we hear about decline in Dubai’s property cost, it’s something unbelievable and rare. But the seemingly impossible actually happened between March 2014 and 2015 when real estate cost in Dubai fallen to almost 6.1 percent. It’s the fastest and most dramatic record when compared with major property players such as France, Italy, Singapore and Spain. What’s more interesting is the continuing alleviation in property costs followed by slower transactions in both commercial and private sector.
Statistics from the first six weeks of second quarter this year showed ongoing reduction in apartment sales price around 1.5 percent. As a result, yields are tightened and rental rate also fall nominally by 2.4 percent.
During a comparison with other news sources, it’s revealed that this tremendous drop isn’t all across the region. Some areas still witness growth namely Deira, Karama, Jaffliya and those closer to Dubai Metro. Villas rent and sale price fall by 2.9 and 0.6 percent respectively that stimulated investors to fall back from endowing in newer properties.
Managing director of Phidar Consultancy in an interview stated;
“The continuing sale price erosion is a positive move however significant concern is on rapid development and upcoming projects”
Economists and analysts cited earlier that lack of demand for luxury properties; US dollar fortification and deterioration of oil prices are causing this dramatic change. Apart from villas, apartment sale and rental rate are affected mostly because more than 60 percent real estate revenue comes from apartment-based projects around Dubai.
Dubai Marina and Downtown where development has already mitigated beforehand aren’t affected much from the price shift. Only those areas that fosters continuing development and newer supply units falls in the category.
Mr. Haider Ali Khan; co-founder of zameen.com and CEO of Bayut.com cited;
“When comparing apartments in Emirate region with those in London and Hong Kong, they’re delivering much better return. Ongoing government investment would heat things up more in near future!”
He also said;
“Returns from large and small apartments in Dubai is approximately 5 to 7.5 percent while in Singapore, London and Hong Kong; it’s somewhere between 2 and 3.5. It seems that real estate market has currently let go of speculative pricing layer that would raise property cost to a more holistic level. This easement is sure to bring a balance in demand and supply.”
As per reports from Knight Frank, 14 locations from round the world experienced this decline with Ukraine taking the lead depicting 15.5 percent drop. It’s closely followed by Cyprus and China where value decreased by 8.2 and 6.4 percent correspondingly. Real estate value in Turkey accelerated by more or less 18.6 percent with Ireland (16.8 percent), Estonia (11 percent) and Luxembourg (12.1 percent) chasing close.
Knight Frank’s information on Dubai further confirmed the slowdown, particularly in luxury sector where foreign investors encompassing a large proportion of Emirati property. Almost 75 percent property buyers from the region are moving overseas including Germany, UK, Russia and Gulf strip.
“Foreign investors are vulnerable to economic recession and shifts” warned Christie’s International Real Estate. The statement is directed to countries relying heavily on foreign investment.
Rent property in Jumeirah Lake Towers and sale in Dubai have experienced the deceleration but ongoing development would eventually uplift the prices in time.
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