Hot property: Dubai real estate offers higher return than stocks

The Dubai Financial Market (DFM) is the clear winner if you compare returns earned on the stock and property market on a quarter-on-quarter basis this year. But, investment in Dubai’s property market on a long term has offered more than double the return over stocks.

An analysis done by Colliers International proves the fact.

The DFM performed positively, increasing 18 per cent of its value in the second quarter 2014, while Colliers' house price index (HPI), which was launched in the first quarter 2007, saw a mere three per cent increase in performance.

However, a comparison of HPI since the inception (over a period of seven years) clearly show property outpaces the DFM.

Colliers says, an investment made in property in Q1, 2007, has to date (i.e. over the seven years time frame) generated estimated returns of 70 per cent, while a similar investment in the DFM, held for the same period, generated returns of only 30 per cent.

Market stabilising

Coming back to reality, the report says the rate of growth in house prices has slowed down in the second quarter, with prices rising only three per cent compared with a five per cent increase seen at the end of Q4, 2013, and Q1, 2014, respectively.

Overall, the index increased by five basis points from 165 points in Q1, 2014, to 170 points in Q2, 2014, while the blended average house price for Q2 at approximately Dh16,275 per square metre (psm) compared with Dh15,747 psm in Q1. On an annual basis, the blended average rate was at Dh17,050 psm in Q2, 2014, compared with Dh14,434 psm in Q2, 2013.

The annual villa index saw an increase of 26 per cent in Q2 with blended average rate at Dh15,866 psm as against Dh12,626 psm in Q2, 2013. The quarterly villa index, however, remained stable though it had risen by 12 per cent in Q1, 2014. The blended average rate was at Dh15,866 psm.

The annual townhouse index rose 18 per cent in Q2 compared with same period last year, with the blended average rate being Dh3,659 psm (Dh11,592 psm). The quarterly townhouse index saw a five per cent increase in the second quarter compared with a six per cent increase in Q1. The blended average rate was Dh13,659 psm compared with Dh13,002 psm.

“Dubai’s property market made world headlines this year with residential property prices increasing by 20 per cent year-on-year. The pace of growth over the last quarter has slowed considerably to a more modest level, this can be largely attributed to the forward thinking measures introduced by the government to dampen property speculation and safeguard the market,” said Ian Albert, Regional Director, Colliers International.

Though the results of the report show a deceleration in growth rate, the consultancy remains “optimistic about the year ahead.”

“While it’s too early to call a trend, the signs are mounting that price growth is easing back to a more sustainable pace,” Albert said.

Knight Frank, UK-based real estate consultancy, has said earlier that it expects prices to rise by 10 to 15 per cent in 2014, with other global consultancies and banks ruling out the possibility of a crash in the market, referring to the solid fundamentals and strong growth expected in the UAE economy.

Investor favourite - Dubai Marina

Dubai Marina recorded the highest number of transactions in the HPI, equating to 14 per cent of the total transactions. Downtown Dubai recorded a 10 per cent share of the total transactions followed by Jumeirah Lake Towers at nine per cent with Motor City and Business Bay at 7 per cent.

Apartment prices in the Palm Jumeirah rose 58 per cent in Q2, 2014, compared to the same period last year — the highest price increase for developments covered by the HPI. The second largest increase was seen Motor City, where prices jumped 55 per cent, Colliers said.

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