Dubai villa prices up 23%, says JLL

Market has now bottomed out, says Jones Lang LaSalle report

Prices of villas in Dubai jumped by 23 per cent in the past one year, while the market has now bottomed out, according to Jones Lang LaSalle (JLL).

In its Global Market Perspective Fourth Quarter 2012 report, the global consultancy said the recovery in prices was most evident in the villa sector where prices rose 23 per cent year-on-year (Q3 2011 vs. Q3 2012), compared to the apartment sector where prices increased by mere four per cent.

“The residential market in Dubai continues to experience higher levels of sales activity and the prime market is now considered to have bottomed out,” JLL said, adding rentals have started to recover, with uplifts of seven per cent for villas and five per cent for apartments (year-on-year).
 
Earlier this week, Knight Frank said Dubai’s status of being a safe haven for Middle East and North Africa buyers pushed villas prices by almost 20 per cent in the past year (September 2011-2012).
 
Around 6,000 new units were completed in the first nine months of 2012, JLL said in its third quarter report, expecting another 17,000 units expected to come to the market before year-end.
On a cautious note, it did say much of the supply was likely to be delayed until next year.

Neutral market in 2014-15

Although Dubai’s office market continues to remain tenant-favorable in 2013, JLL, for the first time, said the market will become neutral (balanced) in 2014 and 2015.
 
As per its global office market conditions matrix (2013-2015), Washington DC, Brussels, Frankfurt, Madrid, Stockholm will join Dubai as tenant-favorable markets next year.
The matrix puts New York, San Francisco, Toronto, London West End, Moscow and Beijing as landlord favorable markets, while Chicago, Los Angeles, Mexico City, Sao Paulo, Paris, Hong Kong, Mumbai, Tokyo will hold a neutral status.
 
“While the overall office market continues to be tenant-favorable in Dubai, demand is still concentrated on just a few buildings and locations, and the range of prime buildings in single ownership is more restricted than the overall vacancy figures would suggest,” JLL noted.
 
Rents in Dubai’s most popular locations such as Dubai International Financial Centre and Emaar Square have stabilised, but vacancies in these areas remain relatively high at around 31 per cent.
 
The consultancy has estimated around 460,000 square metres of office space to have been delivered over the first nine months with additional 335,000 square metres likely to enter by year-end.
Current office stock stands at 6.9 square metres.

Prime rents steady

Globally, JLL said prime rental growth in 2013 is expected to largely match 2012 rates at around three per cent on average, with the majority of major markets projected to register single-digit rental growth over the next year.
 
As in 2012, Beijing and San Francisco are predicted to show the strongest rental performance. London, Tokyo, Moscow, Hong Kong and Sydney are forecast to register above average rental growth (5-10 per cent).
Madrid is expected to see the largest rental decline in 2013, while it is anticipated that Sao Paulo and Mexico City will move into negative territory next year.
 
Dubai, the report revealed, will witness an average rental and capital value growth (0-5 per cent).
 
Office markets across the Middle East and North Africa region continue to be tenant-favourable with occupiers benefiting from an increased choice of new high-quality premises and reduced occupancy costs.
 
“Abu Dhabi typifies this trend with completions of new projects pushing up vacancy levels and providing tenants with greater bargaining power.
“The Cairo and Riyadh markets are also likely to see significant levels of new office supply over the next 12 months, providing a greater selection for tenants,” JLL mentioned.
 
Last week, Citibank, one of the largest Wall Street bank, said recovery of Dubai’s real estate sector was in line with the wider economic upturn and strong economic fundamentals of the emirate.
It emphasised that Dubai’s economic rebound and improved investor sentiment had breathed life into the real estate market in recent months with the volume and value of real estate transactions carried out in the emirate mushrooming since the beginning of the year.
 
The Dubai Land Department has reported total transactions of Dh83 billion in the first nine months of 2012.
 

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