Finished property prices still rising in Dubai, villas outperform

For all the gloomy talk about a property correction in Dubai, the market has withstood the global financial crisis far better than most, reported local estate agents Asteco, with villa prices up by 24 per cent in the last three months and apartments by 20 per cent.

Asteco has one of the most extensive property transaction databases and its survey is widely respected. Rental increases are slowing down, however. Villa rentals were up by 11 per cent in the past three months and apartments by four per cent.

‘With more and more expatriates making a long-term commitment to stay in Dubai… many expatriates see buying a villa as a sound investment,’ said the report. Downtown Dubai villas gained most in the three months, up 61 per cent in value. Palm Jumeirah villas were up 42 per cent, Palm Jebel Ali villas by 39 per cent (despite no actual construction of villas to date) and Emirates Hills by 35 per cent.

Static market

The report expects Dubai house prices to level off and ‘not to show any major increase over the next two years’. The argument for buying therefore revolves around avoiding the very high rentals paid in the city and accumulating equity in property.

Other agents think the market might show some more strength as the hiatus in stock markets during October may have delayed some purchases. There is also likely to be something of a rally in global financial markets after the US presidential election and a dead-cat bounce from the deep sell-offs of October.

Whether this proves to be more than a short term relief remains to be seen. It could mark the start of the traditional seasonal upswing in Dubai property sales in the autumn, at least for completed homes available for immediate occupation.

Off-plan dead

What seems far less likely is an early resumption of a dash for off-plan property. News of the repossession of the $3.5 billion Plantation project in Dubailand by the Dubai Islamic Bank, with off-plan buyers asked to ‘please contact the bank’, is a further blow to market confidence in off-plan developments.

Is it now possible that the completed property market could become entirely divorced from off-plan, with the former continuing modest advances while the latter undergoes a major shake-out. That is what seems to be happening down on the ground in Dubai property today.

Villas look winners, particularly completed ones. Off-plan apartments in poor locations look like the losers.
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