Villas to lead Dubai property recovery
Posted on 11 April 2011 with 3 comments from readers
Prices of villas in upscale communities have stabilized over the first quarter, reported estate agent Cluttons, while apartment prices have dipped by up to nine per cent in Dubai.
Apartments are still over-priced because of the growing oversupply and high service charges. Both factors are depressing for prices.
Oversupply
Estimates for the oversupply of property in Dubai vary widely, with particular controversy over likely future supply. But around 40,000 units are presently listed by agents as for rent or sale. Between 10,000 and 45,000 will be completed this year.
Service charges of up to AED100,000 on apartments with a rental value of AED250,000 make current prices too high (click here). Villas generally have much lower service charges for the same size of accommodation.
However, there will be very few villa completions in 2011, and the future resumption of villa supply is dependent on Nakheel reviving its projects, something it has so far failed to do, breaking its promises again.
Safe haven
So as families move from Bahrain to Dubai there is growing pressure on the supply of villas. The UAE is increasingly a safe haven in the Arab World as well as a business hub with huge oil wealth.
As villas become more and more expensive to buy and rent then families will have to live in the many apartments available instead.
But for investors right now villas are by far the better buy in Dubai, both for rental income without a massive service charge for the landlord to pay, and for price appreciation potential.
3 Comments posted by readers:
Anyone know why the difference between villas and apartments is so large in terms of service fees? In Discovery Gardens I understand that most of the rent goes towards service charges, leaving the landlord with no yield.
Ed Note: Lifts are very expensive to service and you have the common parts to maintain. Actually London leasehold apartments face very much the same issue. Plus you have to pay the agents and contractors to do work you might undertake yourself on a villa or find a cheaper solution.
Hands Down winners ! Owning or renting a villa especially in communities such as Arabian Ranches and Meadows offers a gated community lifestyle which just cannot be replicated by the apartmenst which will continue to flood the market.
These will continue to retain and grow value as they are the natural upgrade path for every successful resident in an apartment who have a large family and/or kids, or simply want to feel the grass under their feet !
Ed Note: No prizes for guessing where you live!
It is obvious communities such as Arabian Ranches that are well established with British schools, a good expat community both owners & tenants, extensive family communities, will lead the way and begin the recovery in the property market. Still highly sort after, Arabian Ranches has sustained and beared up fairly well under the property crisis, especially properties on the Lake or the Golf course, which are still very good value, but steadily rising.
Ed Note: No prizes for guessing where you live!