Dubai Metro’s Route 2020 project — the extension of Red Line rom Nakheel Harbour and Tower Metro station to the Expo 2020 site - will drive price and rent increases in communities served by the new route. This, however, will be only once it gets operational in 2018 and is unlikely to lead to any rental increases this year, believe real estate experts.
The new route will serve areas such as the Gardens, Discovery Gardens, Al Furjan, Jumeirah Golf Estate, and the Dubai Investment Park, which are home to over 240,000 residents.
The extended sector of the Metro line will stretch 15 kilometres and includes seven stations, including two underground ones. “Rents and currently stable and prices are trending down in most locations across Dubai.
“We expect average sale prices to decline by up to 10 per cent this year. The news of the new Metro extension will not alter this general trend, but it will improve sentiment towards those areas to be served by the new metro extension,” Craig Plumb, Head of Research, JLL Mena, told Emirates 24|7. “The impact of this improved sentiment will be felt first in the sales market as it will result in higher rentals being achieved in the future.
“These rentals will not of course apply until after the metro extension is completed and we would therefore not expect the announcement to have any immediate impact upon rentals in 2015.” Mario Volpi,
Managing Director, Ocean View Real Estate, said that any future expenditure by the government on infrastructure will give a boost to [investor] sentiment and ultimately improve the fortunes of property owners in those areas. “Dubai is spread far and wide and the more the city is connected via roads and other means of transport, the more its outer lying developments become part of a thriving city,” he stated.
A survey by Roads and Transport Authority (RTA), released in 2012, said value of property close to Dubai Metro stations and tracks had surged by seven to 34 per cent since the transport system began operating in 2009. Even studies conducted in countries such as the UK, Germany, Japan, Hong Kong, and the US reveal that mass transit systems have had a positive impact on the value and rents of properties, with hikes ranging between three and 50 per cent.
There is increasing evidence that locations next to existing Metro stations are commanding higher prices and rentals, Plumb said, with the trend being most notable in locations such as Business Bay and Jumeirah Lakes Towers – where towers close to the Metro are certainly performing at a premium to those located further away.
The areas that will benefit most are those within 400 metres walk of the stations, with a progressive decline in the benefit as you move further away from this radius.
A comparative analysis done by Emirates 24|7 in January 2014 found rents in residential towers near Jumeirah Lakes Towers were between 13 and 26 per cent higher than those faraway from the station. “There are no purpose-built high-density transit oriented developments (TOD’s) around the metro system in Dubai to date, as the existing route is largely designed to service existing areas of development.
“The new extension allows the opportunity to create new TOD’s around the additional stations and it will be these that will benefit the most in comparison to the surrounding areas.” However, Mario felt it was too early to predict the increase in prices, stating, “As these developments get plugged into the transport system, more and more buyers/tenants will move there so eventually prices will be reflected by this fact.”
Volumes may go up
Parvees Gafur, Chief Executive Officer, PropSquare Real Estate, also believes prices and rents are unlikely to rise in the short term, but could led to increase in number of enquires and transaction volumes. “The area on the Metro route will see an increase in transactional activity and will see increases only after 2018.
“They will be the new investment hot spots but do remember that over the time we will see more new communities being built and that could drive investor interest to other areas,” he stated.