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Expo 2020 win to boost Dubai’s property market in 2014
Prices rose by 42.9 per cent last year, according to Bayut.com
February 4, 2014 1:20 by kippreport
The year 2013 was a positive one for Dubai’s property sector, as not only did it experience a jump in prices, but it also eventually ended up bagging the honour of hosting Expo 2020 on November 27, 2013. With Dubai benefiting from the Arab Spring, creating more job opportunities, taking measures to boost investors’ confidence, and registering sale and rental price hikes, 2013 was nothing short of a happening year for the local property market.
It was not too long ago that Dubai was more of a buyers’ market. In 2013, not only did it transform into a sellers’ market, but escalating rental prices also forced tenants to move to secondary and less posh areas. While this shift may have been a little hard to stomach for tenants, for Dubai it brought along a more profound recovery. As per Bayut.com’s stats, property prices rose by 42.9 per cent last year.
High demand for properties
This shift in focus, in some areas, caused the hike in prices to slow down in Dubai, while, for other areas, it resulted in sharper rises. Because of the same trend, there were a few areas that underwent a correction and recorded minute falls in prices. For the first nine months of 2013, the total transaction value crossed AED162 billion, which was a clear indicator of a lot of genuine buying and selling in the market. Such high demand pushed property prices up rather sharply. All of these elicited warnings from the IMF, which continuously hinted at the possibility of the market becoming overheated too soon. Such warnings, among many others, had a positive impact on the market in the sense that it encouraged the government to take steps on averting any possible crisis.
To curb this, Dubai government doubled the transfer fee, from two per cent to four per cent. Despite the warnings and rumours of a bubble, Cluttons is of the view that there is nothing to worry about, as there is a strong demand for properties in the market.
Focus is shifting from primary to secondary markets
Rising prices have forced some buyers to give up the idea of looking for units in primary areas. Because of this, there seems to be a shift in favour of secondary areas, such as Jumeirah Lake Towers (JLT), which exhibited sharper price hikes in 2013, recording a 25.58 per cent increase in the sale prices of apartments, as per Bayut.com’s stats. Dubai Marina continued to boast steady sale and rental prices throughout the year, except for a few falls here and there.
The same can be said about Downtown Dubai, where the sale price of a studio and one- to two-bedroom apartments registered steady hikes of 15.17 per cent. The Expo 2020 win also played its part in steadying the prices towards the end of the year.
Things could take a turn for the better in 2014, as per the prediction of Abdul Kadir Faizal, CEO of ERE Homes, who believes primary developments, including Palm Jumeirah, Dubai Marina, Downtown Dubai, Emirates Living and Jumeirah Park, would be favoured by buyers and/or investors this year.
Palm Jumeirah had a good 2013, since almost all apartment units exhibited healthy spikes, registering an overall increase of 27.54 per cent in their sale prices. The sharpest rise was seen in the sale prices of studio apartments, for which prices jumped from AED923,410 at the start of January 2013 to AED1,365,532 towards the end of December.
Rents increased steadily throughout 2013
Even though there were some major fluctuations in the sale prices of properties in different areas in Dubai, for rental prices there were many steady hikes across all popular areas, including Downtown Dubai, where the rental trajectory seemed to favour one- and two-bedroom apartments, both of which showed a percentage increase of 16.75 per cent and 14.64 per cent respectively during 2013.
Interestingly, rental prices in JLT showed sharp rises because of higher demand from tenants who no longer could afford units in primary locations and seem to prefer JLT over other secondary locations, because of its proximity to Dubai Marina. Therefore, the rental prices of two-bedroom units climbed from AED101,030 at the beginning of January 2013 to AED136,920 at the end of December.
In contrast to rental spikes in JLT, apartment units in Dubai Marina only managed to register an 8.41 per cent rise in their rental prices, which could be because of shifting trends. It is interesting to note that the rental prices of studios, and one- and two-bedroom apartments in JLT at the end of 2013 were still lower than the rents of the same type of apartments in Dubai Marina at the start of the year.
Overall, both the sale and rental markets in Dubai performed exceptionally well throughout 2013.
What to expect in 2014?
Imran Ali Khan, CEO of Bayut.com, says: “Based on the performance of the property market in 2013, it can be said that 2014 could possibly be another promising year, as the market is likely to benefit from Expo 2020 win.” Knight Frank has also predicted that Dubai could become the best-performing property market of 2014. Some experts are of the opinion that 2014 would be the year of sellers and landlords who would have more control over the market, whereas buyers and tenants will be left with no choice.
What 2014 will bring for the property market of Dubai is a little hard to predict, however, one thing that can be said with surety is that it has indeed made a full comeback. Winning the bid to host Expo 2020 is likely to have a positive impact on the market, which could stabilise the sector for years to come.