Studio apartments in Dubai prices up 36%

Investors and end-users are snapping up studio apartments in Dubai as they are being priced out of the larger apartment market.

Prices of studio units (700 square feet or less) have gone up 36.2 per cent to Dh1,112 per square feet in the past 12 months, reveals an analysis of the market by ValuStrat, a Dubai-based consultancy.

Studio were in high demand during the property boom period (2006 to early 2008) as prices had shot up significantly, leaving buyers to opt for smaller units, particularly studio units.

According to UK-based Knight Frank, property prices in Dubai have risen at the fastest pace in the world with prices rising by over 24 per cent in the year till March 2014.

Transaction data from the Dubai Land Department (DLD) reveals apartment prices to have increased by 27.2 per cent to Dh1,390 per square feet as of August 2014, compared to the same period last year.

 “Dubai’s real estate appetite for apartments was particularly heightened during the property market recovery phase, likely due to apartments offering lower ticket entry prices and attractive rental yields,” says Declan King, Director & Group Head – Real Estate, ValuStrat.

With regards to the strong performance by studio units, he adds: “This displays how in  a rising market the highest percentage gains are often seen by lower priced variants, such as studios as both investors and owner occupiers become priced out of larger alternatives and target smaller more affordable properties in their chase for deals and attractive rental yields.”

During the period (September 2013 to August 2014) under analysis, ValuStrat found upward pressure on rents, especially strong in smaller studio properties.

Though the consultancy says the volume of registered apartment transactions proved reasonably resilient during the period, recording an annual drop of 4.8 per cent (as of August 2014), DLD transaction statistics did not include the high volume of “off plan” sales.

The “off plan” apartment sales are counted in official figures only after the handover.

Besides, the decline in transaction numbers is primarily due to two reasons - increased transaction fees and UAE mortgage cap – which has had a larger impact on the secondary market.

King believes price increases will moderate over the remainder of the year with the fourth quarter being an important period for market assessment.

He expects a “moderate” growth in the last quarter of the year for Dubai’s property market.

“It will be valuable to see what type of buyer  sentiment is displayed after the summer lull & how bookings fare for new launches made at the event,’ he asserts.

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