Off-plan sales on-trend as Dubai apartment prices are out of reach

10/04/2014

Dubai real estate investors are returning to off-plan developments offering attractive payment plans as new figures show apartment prices increased by a modest three percent in Q1.

The report by real estate services company Asteco found villa prices increased by six percent over the same time, which it said signalled moderate growth levels following a spike in prices after the Expo 2020 announcement at the end of 2013.

However, it flagged concern regarding unsustainable pricing in the residential leasing market where apartment and villa rates grew by five percent and three percent respectively in Q1.

The report, released on Wednesday, found increased interest from potential investors in competitively priced off-plan developments offering attractive payment plans, saying many buyers were now faced with a higher cash requirement due to the recently enacted (and now enforced) law regulating Loan-to-Value (LTV) ratios to those applying for mortgages.

More than 3,000 units were launched in Q1 2014 and notable off-plan apartment projects include Mulberry Park Heights at Mohammed Bin Rashid City, Atria in Business Bay, Palm Tower Residences on Palm Jumeirah, and Celestia Serviced Apartments at Dubai World Central.
Villa launches capturing market attention included Yasmin and Rasha at Arabian Ranches, Mira Oasis at Reem and Trump Estates at Akoya, it said.

“There were significant increases in unit prices in Q4 2013 following news of Dubai’s Expo 2020 win and we saw deals flounder as sellers with genuine offers decided to wait in anticipation of further growth. Transactions slowed down in established communities where surging prices went beyond what buyers were willing to pay,” said John Stevens, Managing Director, Asteco.

“Now we are witnessing growth in secondary residential areas, which are attracting prospective purchasers looking for more sensible asking rates with potentially better growth potential.”

DIFC apartments were the best performers in terms of percentage performance gains, rising by nine percent in Q1 with prices per square foot ranging from AED1,800-2,300 ($490-626) due to the impending completion of quality stock. Jumeirah Lakes Towers also saw healthy Q1 growth of eight percent, at AED1,100-1,500 ($300-408) per square foot.

Villa sales price gains were led by moderately priced developments such as Al Furjan and Jumeirah Village, recording 22 percent and 15 percent Q1 growth respectively, with prices per square foot ranging from AED1,000-1,200 and AED 850-1,100.

“We anticipate this trend to continue throughout 2014 but with more moderate sales price growth forecast for the second half of the year,” Stevens said.

In the rental market, the best performing rental areas in Q1 2014 were International City (11 percent growth), Jumeirah Lakes Towers (11 percent) and Dubai Marina (10 percent) where one-bedroom apartments are currently commanding annual rental rates of up to AED50,000, AED 105,000 and AED 140,000 respectively.

The established family-friendly community, The Springs, topped the villa rental sector, up by 13 percent in Q1 with a three-bedroom villa commanding AED220,000 per annum.

Movement in the commercial market in Q1 was positive for both office sales prices and rental rates, which were up by 11 percent and 8 percent respectively buoyed by a stable economy and positive market sentiment.

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