The demand for villas remained high given the relative scarcity compared to townhouses and apartments, according to Colliers International's House Price Index (HPI), which was released yesterday. The scarcity has given rise to escalation of prices by 78 per cent in the past one year.
"Demand for villas remained particularly high given the relative scarcity of villas when compared to apartments. More dwellings are under construction and are due to be delivered between the end of 2008 and the middle of 2009 such as Jumeirah Park and Jumeirah Village. Villas constituted 21 per cent of the total mortgaged properties used to collate the index," said John Davis, Chief Executive of Colliers International UAE.
The quarterly overall villa index continued to increase throughout 2007 until the first quarter of 2008, with prices increasing by 85 per cent during the period.
The blended average rate per square foot for villas in Dubai in the first quarter was Dh1,338. Apartment prices increased by 82 per cent in value as townhouse prices rose 29 per cent for the same period. The index further noted the average blended rate per square foot for developed property in Dubai in the first quarter of 2008 was Dh1,579. Property prices in Dubai continued to increase in each quarter between the period from first quarter 2007 and first quarter of 2008. Also, the first quarter of 2008 showed the highest increase per quarter from the base quarter. During the first quarter of 2008 the index rose by 42 per cent to reach 178 points.
The growth of townhouses during the period was slower than for apartments and villas. The annual index increased from 100 points in first quarter of 2007 to 129 points in first quarter of 2008 – representing an increase of 29 per cent increase. Townhouses constituted 15 per cent of the total mortgaged properties used to collate this index.
However, in third quarter of 2007, the overall quarterly townhouse index for Dubai declined by 16 per cent, reaching 91 index points. This was mainly attributed by the HPI to a fall in prices in developments such as The Springs, Arabian Ranches and Jumeirah Village. However, the largest increase occurred in last quarter of 2007 where the index increased by 24 per cent in this quarter to reach 112 index points. The average blended rate per square foot for townhouses in Dubai in the first quarter of 2008 was Dh1,024.
There was an increase in the number of completed apartments released onto the open market during first quarter of 2008, particularly evident in Dubai Marina, The Palm Jumeirah and Downtown Burj Dubai. "This influx of additional supply available for purchase positively affected the average rate per square foot for apartments, increasing it to record levels of Dh1,841 in the first quarter," said Davis.
The lending institutions, which are currently participating in the index are HSBC Bank Middle East, Barclays Bank, Amlak, Dubai Islamic Bank and Emirates NBD. The index consists of properties in Arabian Ranches, Springs, Green Community, Meadows, Greens, Palm Jumeirah, Jumeirah Beach Residence, Downtown Burj Dubai, Jumeirah Park amongst others.
The HPI index report includes details on the built-up area of these properties as well as total value of transactions per month for listed developers. Based on coverage of thirteen developments in Dubai, weighting has been apportioned on the basis of unit type (apartment, villa or townhouse). Apartments, villas and townhouses have been weighted at 55 per cent, 34 per cent and 11 per cent, respectively.
According to the index, property prices in foreign ownership zones continue to increase – this has been driven by strong demand for properties from pure investors, speculators and end users. Said Davis: "There are many reasons for the increased demand of properties in these foreign ownership zones.
"The economy of the UAE, and specifically in Dubai is achieving high growth rates in real GDP at a rate of 11 per cent per annum."
"A large number of banks and financial institutions, national, regional and international, are now providing competitive mortgage facilities for both residents and non residents.
"The index report is across expatriate free zone and the numbers will keep growing. We must also emphasise the fact that this index is not a mere snapshot. It an on-going process over a period of time," said Davis.
Colliers International will consider an office price index once the secondary office market matures further and is also considering an index for Abu Dhabi. "Again, we will wait for the market to mature and build a considerable secondary interest," said Davis.
According to the index, increasing residential rental rates in Dubai, averaging Dh950 a square foot is making ownership more appealing and cost-effective for end users. The decline in value of the dollar-pegged dirham in relation to other global currencies has enhanced the attractiveness of property in Dubai to expatriates.
Increasing construction costs are also causing an increase in the sales price of newly launched developments in Dubai. Construction costs are expected to increase by 18 per cent to 20 per cent by end of 2008, said the report.