In the past year, prices of apartments have spiralled by 38 per cent
Dubai: Dubai’s rising house prices, underpinned by a much-improved economy and strong demand, are likely to continue their uptrend, but no bubble is on the horizon, industry experts said.
After a severe decline in prices and demand during the global recession in 2009, Dubai’s real estate market started to recover in 2011. In the past year, prices of apartments had gone up by 38 per cent. Rents also increased by 20 per cent for flats and 17 per cent for villas.
Analysts have said that the recent price movements have been driven by real demand, as well as by stronger economic fundamentals. Dubai’s economy has been buoyant in recent years, thanks to its expanding logistics, hospitality and retail sectors.
A stronger economy has translated into higher levels of job creation, which in turn triggered further population growth. And with Dubai’s population continuously growing, more people are looking for apartments and villas, causing values to creep up. Affordable lending rates are also enabling investors to buy properties.
“This time around, substantive and meaningful demand from end occupiers taking advantage of attractive mortgage offerings from the banks is helping to drive the market, in addition to the return of investor interest in the market,” Jonathan Fothergill, head of valuations, UAE, at Cluttons.
Faisal Durrani, associate at Cluttons research, said that the upward momentum in housing values look set to continue. “The demand pressures all suggest that an upward creep in capital values will persist,” Durrani told Gulf News earlier.
Improving business confidence is another factor that could lead to higher price increases. “Improving fundamentals and rising prices are feeding through to improved confidence. This could drive prices further up, with prices and investment feeding off of each other,” Standard Chartered said in its recent report.
A recent Business Confidence Survey led by the Department of Economic Development (DED) showed that more than half of businesses (55 per cent) were upbeat about achieving higher sale revenues in the second quarter of the year.
About 30 per cent also anticipated stable sales, while 55 per cent said they were willing to invest during the next several months. Almost all businesses included in the survey (98 per cent) had intentions of either increasing (23 per cent) or maintaining (75 per cent) their payroll count.
Standard Chartered also said that Expo 2020, which is expected to create 277,000 jobs, will help sustain the housing market. However, the bank maintained that despite the rising prices, “there are no serious indications of a speculative bubble” in the real estate market.
“The market seems to be driven by fundamentals rather than excess speculation, in contrast to what the market went through in 2008. The outlook of the market will, therefore, depend on how these fundamentals evolve over time,” the report said.
Non-premium areas benefit
The continued upward trend in housing rent has led many tenants to move out of premium locations, causing non-premium areas to benefit from a surge in demand.
As demand for affordable accommodations increases, areas like International City and the Springs have witnessed noticeable increases in rent, according to a Standard Chartered report.
International City topped all other areas with an increase in average rental rate of 27 per cent year-on-year and 11 per cent quarter-on-quarter.
“Similarly, the top-performing area in the villa leasing markets is the Springs, with an increase in the average rental rate of 35 per cent (year-on-year) and 10 per cent (quarter-on-quarter),” the report said.
In the residential-sale market, the top performers are the Greens, posting a 44 per year-on-year increase in apartment sales and Jumeirah Village, with a 40 per cent increase in villa sales year-on-year.