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18 July 2024

No Dubai property price correction this year: JLL

By Parag Deulgaonkar

Jones Lang LaSalle (JLL), a global property consultancy, said on Monday the Dubai property market was "smarter" this time with investors becoming more cautious and better regulations in place.

"There has been concern that Dubai will experience another bubble, but there are many differences this time around that makes for a ‘smarter’ market," Craig Plumb, Head of Research, JLL Mena, said at a press meet in Dubai held to release their top 2014 trends for UAE real estate market (Scroll down to read).

"Some of these differences are that investors are more cautious, regulations are better, developers are less reliant on pre-sales and significant levels of new supply.”

He added that though rise in residential property prices was “irrational” in 2013, the rate of increase will slow-down this year.“ There won't be any correction this year," he stressed.

Citibank, Standard Chartered and Golmand Sach Group have in the past stated that the Dubai property market growth was sustainable and there was no fears of a property crash.

The Dubai Land Department (DLD) figures revealed real estate transactions rose by 53 per to Dh236 billion from Dh154 billion in 2013 with Indians, Britons and Pakistanis topping the list of expatriate buyers.

DLD increased property registration fees in October 2013 from two per cent to four per cent of the property value to discourage flipping in the market. More regulations to control flipping are likely to be released in coming months.

Rents rise to slow

In 2013, property prices rose by over 22 per cent, while rents jumped by 17 per cent.

“We don’t expect prices in the Dubai residential market to cross 22 per cent this year. Rent increases will be below the 17 per cent level seen last year," Plumb said.

A rent cap was in place in Dubai that has limited rent increases for existing tenants between five and 20 per cent. New leases aren't government by the cap.

UK-based Knight Frank had already said Dubai will top the list for global cities that will witness double digit price growth in 2014 with prices jumping by 10 to 15 per cent in 2014 driven by Expo 2020 development and buyer incentives.

20,000 new units

Though in its Q4 2013 report, JLL had predicted that 28,000 new units will be released, Plumb said that realistically they were expecting completion of only 20,000 new units this year as some projects might get delayed.

Asked what factors could lead to a "correction if likely" in the market, Plumb pointed to external and internal factors.

“External factors could be a financial or a geopolitical event. Internal factors will be continued growth of prices, reaching to an unsustainable level, or construction material/resource constraints.”

Reaching 2008 price level?

Plumb said prices in some locations had reached the 2008 price level, adding that on average the 2008 level may be reached in coming 10 to 18 months.

“In some location we are witnessing that prices have reached the 2008 level, but overall we see that prices will reach that level in the next 10 to 18 months.”

But Knight Frank report said that average prime apartment prices were still about a third below where they were during the 2008 peak, suggesting they still have plenty of scope to rise.

“Hardly any new high-end apartments are due to be delivered over the next 12-18 months (the majority of new prime supply will be made up of villas), further supporting the case that prices in the former segment will play ‘catch-up’,” Knight Frank said, adding, "the prime residential market will benefit from the growing population of high net-worth individuals (HNWIs), attracted by the emirate’s favourable tax regime, strong lifestyle characteristics and a well performing economy."

JLL’s top 10 trends for 2014 are

*Avoiding another bubble

*More measured mega developments

*Future directions of growth

*Expo 2020 – Important long term but limited impact in 2014

*More varied approaches to funding real estate

*Two speed investment market

*Growth in corporate activity and workplace transformation

*More investment sales in hotel sector

*Sustainability – from talk to action

*Improved valuation and measurement standards