Residential property prices in Dubai are expected to continue their upward trend over the remainder of 2014, but at a slower rate, a new report by Jones Lang LaSalle (JLL) said on Monday.
The real estate investment and advisory firm said in its ‘Dubai Real Estate Market Overview Q1 2014’ report that the emirate’s residential market maintained its momentum with average prices increasing 33 per cent year-on-year, with average rents improving 23 per cent.
“While the market remains shy of its 2008 peaks in most locations, prices in some areas have now reached peak levels,” the report said, observing that activity in Dubai’s real estate investment market remained strong.
A market intelligence report by Tasweek Real Estate Development and Marketing noted that Dubai’s real estate prices abruptly leapt by an average of 20 per cent post the Expo 2020 win. “However, growth slowed down in the first quarter of 2014, bringing the property prices to a more realistic level of a 10 per cent to 15 per cent increase. This trend will continue for the year as businesses wait for the government to announce projects related to the World Expo.”
Craig Plumb, head of research at JLL Mena, said that Dubai’s momentum from 2013 has carried through into the first quarter of 2014. “The residential sector is leading the way with continued strong growth in both rentals and prices, while Dubai remains one of the world’s strongest performing hotel markets. Office rents have increased in prime locations in the first quarter, but the market remains extremely selective. Increased rents and reduced choice in the prime locations may lead to a more general recovery of the office market going forward.”
The JLL report noted that Dubai’s real estate market commenced 2014 with optimism, driven by last year’s strong performance and continued economic growth. “This optimism remains focussed on the residential sector, which witnessed increased prices and rents across all areas, with rates growing faster in secondary locations. The retail, hotel and industrial segments continue to experience growth, while the office sector remains more selective.”
In its market overview, the real estate consultancy firm said that the Dubai economy is expected to sustain its growth momentum. According to the Department of Economic Development, the GDP of Dubai will grow 4.7 per cent in 2014. Tourism, trade, transportation and real estate are all witnessing strong performance and will continue to be the main drivers of the economy.
“The business outlook for Dubai continues to improve, with higher expectations of future business conditions, sales volumes and profits. The Department of Economic Development’s composite Business Confidence Index (BCI) stood at 144.3 points in fourth quarter 2013, up eight per cent from the same 2012 period, with more businesses willing to invest in expansion, recruitment and technology upgrades,” JLL said in its report.
The Dubai Land Department has revealed that the total value of real estate transactions in Dubai rose from Dh154 billion in 2012 to Dh236 billion in 2013. “A major component of this increase was the return of significant land transactions. Despite this increased activity, there remain few reported transactions of completed, income producing asset,” JLL observed.
Dubai’s office market sustained its recovery as overall occupancy rates and prices have increased in first quarter 2014. “With occupier demand continuing to be focused on good quality space, average rents in prime locations are expected to increase with 2014 seeing a broader based recovery with increased interest in secondary office locations given the declining choice in prime locations.”
According to JLL, the retail market continues to improve, registering rental growth in both primary and secondary malls. Street shops also continue to witness popularity with a number of new project launches. The hotel sector maintained its strong performance supported by a growing number of tourist arrivals. Year-to-February saw occupancy rates reach 88 per cent and Average Daily Rates rise to $298.
The hotel sector is expected to maintain its positive performance and growth, as the government introduces new initiatives to attract further tourists and diversify the hospitality sector. The industrial market continued to perform well in the quarter. The area to the south of Dubai continues to attract most attention, given improvements to the surrounding infrastructure, good connectivity, and proximity to the Expo 2020 site, the report said.
