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Q2 Dubai Residential Apartment Price Analysis

In 2013, Dubai’s economy seems to have come back on track with an estimated GDP growth of 4.7 percent. One of the fundamental pillars of recovery was revival of euphoria in the real estate market which registered a total transaction of AED 236 (USD 64.25) billion, an exorbitant 53.2 percent increase from the year before. Slightly less than half of the purchases were made by international buyers. Interestingly, they came from 162 nationalities, indicating a rise in global interest in Dubai.

In tandem with such sentiments, the first quarter (Q1) of 2014 witnessed a total investment of AED 35 (USD 9.3) billion, up from AED 22.3 (USD 6.07) billion in Q1 2013. However, the intensity which the real estate market in the Emirates has been enjoying over the past few quarters seems to have moderated in given quarter, which we believe as a self-generated correction by the market forces after the recent hike.

According to the data revealed by Dubai Land Department (DLD) total amount of transactions closed in Q2 is worth AED 52 (USD 14.2) billion, a 14.7 percent decline compares to Q1. This is however far away from a slowdown, as the Emirate’s real estate market is still among the most attractive markets across the globe and is on the high agenda of both individual and institutional investors.

At Research Konnection, we have conducted our quarterly research on the Dubai’s real estate market dynamics. The research has been split into three parts; Residential Apartments, Villas and Commercial Properties. This given part is based on our analysis of residential apartments.

Price Analysis of Residential Apartments in Dubai (Q2 – 2014)

After constantly being bullish across the last five quarters, the residential apartment market in Dubai has experienced a moderate slowdown in the second quarter. It could be attributed to recent exorbitant hike in prices of properties coupled with regulatory steps such as, increase in registration fee from 2% to 4%, as instructed by Dubai Land Department (DLD); putting a cap on mortgage based funding and adoption of self-regulatory measures by numerous property developers.

Other factors might include, gradual dip in the frenzy associated with the World Expo 2020 win, as it has been over six months since the historic announcement was made. The overall market which was accelerating at an unprecedented speed seems to be showing signs of stabilization. Nevertheless, the underlying markets sentiments are far away from any stagnation and are expected to continue staying buoyant in the near future as well.

The market survey which has analyzed 10 Dubai based Freehold areas in terms of residential apartment sales have split them into Tier 1 and 2 based on average prices of apartmnets. The dearer Tier 1 markets encompass Jumeirah Lake Towers (JLT), Dubai Marina, Jumeirah Beach Residence (JBR) and Downtown Dubai. The relatively economical Tier 2 consist of International City, Dubai Silicon Oasis (DSO), Jumeirah Village Circle, Dubai Sports City, Discovery Graden and Al Barsha.

In terms of sales Dubai International City, Dubai Silicon Oasis, Jumeirah Village Circle and Dubai Sports City are believed to be some of the strongest performing Tier 2. Except International City, all other areas are relatively new and involves a large chunk of the present construction activities. The Figure 1 and 2 below shows an estimated average apartment sales price in million for Tier 1 & 2.

Figure 1: Shows the estimated average sales price of in million AED for Tier 1 markets. (Source: Research Konnection Market Survey)

Most of the markets have been performing well in the TIER 1 category. Prominent markets are JLT and Dubai Marina. The latter has a slight edge since it’s believed to be a tourist attraction and hence is better aligned with investment purpose. It was also indicated from the fact that Dubai accounted for highest number of apartment sales in the last quarter, which was worth at near around AED 6 (USD 1.6) billion.  After the recent announcement of Dubai Tram, the value of Dubai Marina is expected to further increase. Downtown Dubai is also one of the sought after market in the category as it is believed to the epicenter of Dubai’s commercial, cultural and retail sphere. The price of Downtown Dubai will also escalate further as work on the nearby canal project has commenced and this would further add to the international tourism component of Downtown area.

Figure 2: Shows the estimated average apartment sales price in million AED for Tier 2 markets. (Source: Research Konnection Market Survey)

 

Though all the properties are performing well in Tier 2 categories, but two properties, which stand apart, are International City and Al Barsha. International City is believed to be one of the most economic residential localities in Dubai. Besides economic housing, the locality is also touted for having plethora of affordable food outlets, shisha joints, cafes, hyper markets, medical facilities and other amenities. It also has very easy connectivity to Dragon mall, which is up for its second phase of expansion. Other sought after property is Al Barsha, which due to its proximity to Sheikh Zayed Road, JLT, Al Quoz Industrial Area and Jebel Ali Free Zone is preferred by employees working over there.  AL Barsha is also used by individuals who prefer doing up and down to capital Abu Dhabi, which is known for being very expensive in terms of rental.

Research Konnection

Research Konnection is a Dubai based market research, economic feasibility study and business consulting advisory. Out of the many sectors, which we keep focus on, real estate is one of them. Our research advisory services could be used by real estate investors, investment advisories and consultants. Not to mention urban planners, developers, designers, architects and maintenance companies. If you are one of them and looking for any further information, feel free to drop us a mail at info@researchkonnection.com or Waqas@researchkonnection.com.

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