(MENAFN- Khaleej Times) Around 20,000 to 25,000 residential units are estimated to be delivered by developers in Dubai in 2015. So, where are these units likely to be concentrated? With Dubai witnessing a scarcity in prime areas to develop more property projects, Dubailand, Meydan, Umm Suqeim Road and Jebel Ali are emerging as new growth corridors. Peripheral areas such as Jumeirah Village, International Media Production Zone, Sports City and Green Community are also emerging as viable options for housing aimed at the mid- to low-income households.
According to property consultancy CBRE, around 65,000 residential units are expected to be delivered in Dubai from 2015 to 2017. Of these, apartments will constitute the majority share with 79 per cent while villas will account for the remaining share.New real estate growth corridors emerge in Dubai
"In the villa market, we expect a large amount of new supply on either side of the Shaikh Mohammed bin Zayed Road, with increased activity at Dubailand on one side and from Barsha south to Meydan on the other. We've come to a point where there is a lack of prime space available for apartments in Dubai, so supply will come in the form of more affordable offerings in locations like the Green Community and further towards Dubai World Central," said Richard Paul, head of residential valuations at Cluttons.
New real estate growth corridors emerge in DubaiHowever, the majority of supply will be suitable for mid- to high-income households. Very little new supply will be delivered for the mid- to low-income household brackets, which is the most undersupplied segment.
At the other end of the spectrum, luxury properties continue to do well, undeterred by market dynamics that affect mass housing projects. According to Luxhabitat, a Dubai-based luxury property brokerage, homes with values above Dh5 million located in certain areas or developments are defined as luxury real estate.
Though Dubai witnessed a raft of luxury property launches in 2013 and 2014 such as Dubai Hills Estate, Indigo by Zen and Anwa by Omniyat in Dubai Maritime City, few such units are scheduled to be handed over in 2015.
According to Andrew Cleator, luxury sales director at LuxHabitat: "There is not much in the pipeline for luxury properties in 2015 - Sanctuary Falls in Jumeirah Golf Estates is due to start handover in Q3 along with Palazzo Versace in Culture Village. We expect more luxury properties to be coming online in 2016."
With Dubai continuing to remain a safe haven as political instability persists in the wider region, the emirate is attracting several high-net worth individuals who want to park their funds in real estate. Developers operating in the premium segment are quick to gauge this latent demand and launch projects.
"A few developers have realised that the average quality for high-net worth individuals is not high enough. Many wealthy end-users moving to Dubai have high expectations and don't find properties with the level of standards they are used to. Therefore, there is a trend in the market to develop projects to meet these demands," said Oriol Font, chief executive officer of Luxhabitat.
Win-win for buy-to-let investors
Checks imposed by regulators on the UAE property market have resulted in a stagnation in capital value growth. However, with no significant impact on housing rents, it's a win-win situation for buy-to-let investors chasing yields. As opposed to leading property markets in the world, Dubai offers attractive residential yields in the range of six to eight per cent.
"The most active investors in the market are chasing yield. High net worth individuals and institutional investors are looking at the Dubai market, but they are especially yield sensitive," said Jesse Downs of Phidar Advisory, adding: "Savvy high-net worth investors often consider markets in Europe and North America and use these as benchmarks to measure the returns in the region."
According to Cluttons' Richard Paul: "We are seeing investment from owner occupiers who are not affected by the market softening as they see their long-term future in Dubai."
For premium properties, interest mostly comes from end-users. "Wealthy buyers are looking to buy properties that satisfy their lifestyle; therefore, they represent the majority of buyers at this end of the market. Having said that, there are also a significant number of investors who have an investment strategy based on high-end residential because they feel that are the properties that offer less risk and offer higher returns in the long term," according to Luxhabitat's Oriol Font.
Even as developers seem to be pushing ahead with schemes, there is no denying the slowdown in property sales tranasactions in Dubai. This has triggered fears of an oversupply of housing.
"There are 25,000 units scheduled for handover in 2015. This amount of inventory will have a downward pressure on prices as investors look to offload property to liquidate funds. Rental prices will also be affected. As more stock becomes available, there will be a greater choice for the average renter," said Mario Volpi, managing director of Ocean View Real Estate.
However, other market experts are of the view that supply expansion will help grow Dubai's economy grow sustainably. "Unless there is a sudden and significant slowdown in hiring, Dubai residential supply and demand will stay near equilibrium. New housing units are needed to temper some of the massive rent inflation experienced in 2013 and early 2014. Avoiding high rent inflation is absolutely critical for maintaining stable and sustainable economic growth," said Jesse Downs, managing director at Phildar Advisory.
Meanwhile, Indian buyers continue to be the main drivers of Dubai property. "They invested Dh10 billion last year, followed by Britons [UK passport holders] at Dh5 billion and Dh4.5 billion from Pakistanis. GCC nationals combined accounted for Dh3.3 billion of real estate transactions last year," Volpi said.
So, where are these investors parking their funds? "There is still a lot of demand for Emaar launches because of its brand credibility and delivery record. There is also demand for off-plan projects with a relaxed payment plan [Glitz from Danube was sold out, they offered one per cent payment a month]. Commercial space in Jumeirah Lakes Towers is still very attractive both to rent and buy since many new business are setting up in the Dubai Multi Commodities Centre," said Cecilia Reinaldo, managing director at Fine & Country. "Off-plan projects like Jumeirah Park Nova villas are available at zero per cent premium. Although the premium was close to 20 per cent, since full finance is only available upon handover and a 50 per cent downpayment is required upfront, many investors who purchased at launch are ready to exit at cost."
Crude swings to impact Dubai after a lag
There has been much debate on the impact of the dip in crude prices on UAE's property market. While most agree that Dubai's economic diversification will offset any blow from fall in hydrocarbon revenues, market experts remain cautious. Crude swings to impact Dubai after a lag
"In the past, investors of real estate have come from oil-producing countries such as the UAE, Saudi Arabia, Iran and Russia, so with the oil price down to approximately $50 a barrel, there will be less of these buyers around and as such real estate prices will have to fall as a consequence," said Ocean View Real Estate's Mario Volpi. "Oil is only responsible for an estimated one per cent of Dubai's gross domestic product, so Dubai's economy is not significantly and directly impacted. However, the impact comes through regional capital flows. Any substantive impact will likely impact Dubai after a lag of two to three years," suggested Jess Downs.
Offering a brokerage's perspective, Cecilia Reinaldo said: "Despite the recent stock market drop, the oil price reduction and the ongoing issues in Russia and certain European markets, the purchasing sentiment is still robust among buyers. Many have re-financed their own homes to release equity and purchase off-plan."
However, the luxury market remains oblivious to swings in oil prices. "We don't expect it to be relevant at this niche of the market. At this end of the market, the value of properties is normally less affected by the macroeconomics of the country than mass market properties because both buyers and sellers are normally less price-sensitive," said Luxhabitat's Oriol Font.
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