KHALEEJ TIMES, Thursday, May 17, 2018 | Ramadan 1, 1439
Why time’s right to buy a home in Dubai
Residential rents in Dubai
are now more than 15 to 20 per cent lower than peak levels in 2015 while sales
prices are also fall in affordable category with increasing supply of
residential units, says a latest report.
With the onset of an early Ramadan followed by summer, consultancy Core Savills
said in 2018 first quarter report that rental softening in Dubai is expected to
continue for the remainder of 2018.
Sales prices also continued to decline across most communities, with central
areas seeing larger declines than outer areas. Downtown Dubai and Dubai Marina
saw the sharpest declines at 7.5 per cent and 6.6 per cent, respectively,
resulting from the large number of new launches within this area, estimated Core
However, rents are expected to see an uptick in 2019 and 2020. Market observers,
therefore, believe now is an ideal time to buy property in Dubai before the US
Federal Reserve increases interest rates, forcing mortgage buyers in the UAE to
shell out more in repayments for their home. While the 25 per cent down payment
can be a challenge for some, this threshold is now within reach given the lower
The softened sales market has made the cost of property ownership lower than the
cost of renting for long-term occupiers, making it attractive for tenants to
move to ownership. This shift to ownership is also shrinking the rental pool,
leading to further downward pressure on rents.
According to data from Reidin, the average sales price of a 1-bedroom apartment
in Dubai is Dh1.03 million and a 2-bedroom unit is Dh1.8 million. The average
rent for a 1-bedroom apartment in Dubai is Dh71,000 while average rent for a
2-bedroom unit is Dh114,000.
Jumeirah Lakes Towers (JLT) and Emirates Living also saw a decline in sales
prices owing to new launches, in addition to witnessing demand shifting to
Jumeirah Village as products with similar or lower price points and newer build
quality become available.
Communities with multiple phased deliveries such as Mira, Mudon and Arabian
Ranches have also cast significant downward pressure on The Springs and The
Meadows’ sales market. According to Core Savills, Dubailand was the only
community to see a visible rise in apartment sales prices at 2.7 per cent. This
is due to the fact that most new sales activity is concentrated within this
area, with lower entry prices driving sales.
“The cascading effect of new stock impacting secondary sales prices, either
within the community or in adjoining areas, is one of the strongest reasons
causing a delay in sales price recovery. However, this hasn’t significantly
dampened occupier sentiment due to the wide variety of options now available at
very competitive prices by developers in new launches,” said Edward Macura,
partner, Core Savills.
Over 6,000 units were delivered in year to date 2018. Core Savills forecasts a
further 15,500 units to be handed over during the remainder of the year. Newer
villa districts such as Dubailand and Jumeirah Village have seen a more direct
impact of the supply surge. Over the rest of the year, Dubailand will represent
almost a third of total handovers.
Meanwhile, developers are exhorting end-users and investors to identify pockets
of opportunities in a difficult market. “The Dubai property market cycle has
weakened. The longer we go through a weak cycle, the closer we are to a
recovery. If high oil prices persist, it will have an impact on property prices.
As Expo 2020 gets closer, there will be a sense of urgency to participate in the
property market. So long there is sufficient return to risk capital, there will
be capital deployed to exploit the opportunity,” Adil Taqi, CFO, Damac
Properties, told Bloomberg TV.
However, home ownership is not merely a function of rents, but also a confluence
of factors that include job security, city liveability, etc. Hussain Alladin,
head of IR and research, Global Capital Partners, said: “In Dubai, with prices
being more attractive now, the case for buying has become stronger and it is
being made visible in mid-income communities such as Sports City, Jumeirah
Village Circle and Dubai South. It is important to remember, however, that home
ownership is part of a longer term trend that gets punctuated with short-term
cyclical movements of the economy. It is the downturns that lead to anxiety.
Yet, as history shows, it is these downturns that are always the most attractive
investment entry point. So, from that perspective alone, it appears as if
residents should be more inclined to purchase.”
After being resilient over the last 2 years, the rental market in core apartment
and villa districts such as JLT, The Springs and The Meadows are starting to see
rental drops of 9 per cent and 5 per cent, respectively, estimated Core Savills.
Bigger units have seen significantly higher rent drops compared to studio and
1-beds as higher income occupiers are becoming increasingly cost-conscious or
moving up the housing ladder to ownership.
“Within a given district, bigger units have seen higher drops than smaller
units, enabling tenants to upgrade without significantly impacting their rental
outflows. On the other hand, tenants who have seen contractions in housing
allowances are saving considerably by downsizing either within the same district
or moving to outer areas, if they are unable or unwilling to renegotiate with
their current landlords,” added Macura.