For anyone searching for a deal on a luxury property in Dubai, now might be the time to seal one.
Latest official data suggest that at locations such as Downtown Dubai and Dubai Marina, “Units (are) being sold at a much lower price indicating sales from a small section of landlords who may be pushed to exit a bottoming market as these buildings were launched during the run-up to the 2014 peak,” says a new report from CORE, the consultancy.
“Similar low sales price anomalies were also witnessed in Palm Jumeirah villas, indicating that investors/end-users looking for opportunities may still be able to transact in the prime segment as we see increasing flexibility from a few landlords still looking to exit. However, we expect demand for these core locations as an investment opportunity among long-term buyers to intensify over the next few quarters.”
That more investors are seeking exists on their property assets is a relatively new development. All through the better part of the year, many of them were more likely to hold on rather than sell at a time when prices were still under intense pressure and investors remained wary of committing. But, now, transaction values are more range-bound - or at least for the moment - and sellers are taking heart from that.
Another reason why they are looking to sell now could be because of the heavy competition from new off-plan launches, which, according to a new Cluttons report, are having price options lower than what were available earlier.
With more competition on the anvil, existing investors see the present as the ideal time to cash in at prevailing prices rather than hold and run the risk of values softening.
The CORE reports holds out a warning that prime luxury realty in Dubai could yet see some declines next year. “We expect prime apartment districts - such as Downtown, Dubai Marina and Palm Jumeirah - to decline 2-5 per cent further until early 2017,” it adds.
But it needn’t be all gloom for landlords holding high-end ready property - at some point in the near future the tide could turn. “We can clearly see the shortage of prime residential stock, expected to only be about 19 per cent of the total residential stock slated for 2017,” the report notes. This “should cast steady upward pressure on sales prices for well-maintained existing prime units in the mid-term.”
For such investors, being patient is the key.
There are other mini-dynamics forming in the marketplace such as a sharp reduction in the number of new villas ready for handover next year. “A skewed apartment-to-villa ratio is emerging, with 2017 supply estimated at 90:10 – a sharp contrast to a 75:25 ratio of 2016,” the report adds.
“This trend seems to address the ever-growing affordability issue of the cost-conscious consumers who prefer compact units with efficient layouts and attractive entry points.”
For the moment, it’s the mid-market that rules. Apartment districts such as Silicon Oasis, Sports City, International City and Discovery Gardens have risen “3-5 per cent from their lowest price levels in Q1-16,” the report says.
“A growing interest is also being marked from investors seeking bulk deals as these locations provide high short term yields. However, risks associated with affordable housing, such as higher maintenance and lower quality of construction, may undercut the overall earnings of the investors in the long term.”
And as for The Springs and The Meadows, the “good deals are drying up” as prices have gone through a 6 per cent hike from their lowest point in Q1-16.