Property in 16-month uptrend

Dubai real estate prices and rents witnessed 16th consecutive monthly increase in March, continuing the steady recovery in the sector and highlighting the return of investor confidence in Dubai, says a report by Deutsche Bank.

However, despite the gains made over the past year-and-a-half, property prices in the emirate remain at least 40 per cent below their peak value achieved in 2008, the global bank said in its report. “Apartment prices remain between 43 and 61 per cent below peak with villa prices between 12 and 49 per cent below peak prices. Rental values show similar trends,” the bank’s report states.

Property prices increased by 1.5 per cent from February to March with price increases recorded across most areas, while prices and rental values remain significantly below their peak of 2008.

The figures take the year-to-date growth in property prices to over 6.2 per cent. Apartment prices were up by 1.5 per cent while villas were up 1.6 per cent.

Despite this recovery, the shares of real estate developers trade at a discount to emerging markets and world developers, according to the report.

The growth in prices and investor confidence continues despite increased supply. Since the second half of 2011, Dubai has witnessed an increase in project launches by master developers such as Emaar, Nakheel and Damac.

Nakheel has restarted various projects while Emaar recently pre-sold four projects with over 1,000 units sold overnight with prime units selling at a 40 per cent premium to market prices reflecting trends seen around the world. Emaar announced another project in Downtown Dubai which went on sale on April 20.

Commenting in the report, research analyst Athmane Benzerroug said: “The price recovery that started in late 2011 in prime properties is now spreading to second tier communities. Despite new supply, investor confidence remains strong, while main master developers are accelerating project launches.”

Despite the growing confidence in the market and the 1.9 per cent increase in share prices seen in March, UAE developers continue to trade at a discount to emerging markets and global developers.

Benzerroug said: “On a price to book value and a price to earnings multiple, UAE developers trade at a discount to emerging markets and international developers. UAE developers are trading at a 0.6x 2013 price to book value versus 1.0x for emerging markets and 1.4x for world developers.”

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