The UAE’s Luxury residential market continues to thrive
The cycle of price softening in Dubai’s more established secondary market villa communities – the true luxury sector – appears to be nearing an end in 2016 as transactional fluidity returned throughout the year. After a short period of stagnation, sellers, now operating in a more stable, regulated UAE market, have reset their expectations.
High value for money transactions have precipitated the bulk of this year’s sales in established communities, such as Palm Jumeirah, Emirates Living, Jumeirah Golf Estates and Al Barari, which are some of Dubai’s most prime villa developments. While there is still well valued property to sell through tired sellers, Dubai’s prime communities are affluent, so there isn’t a huge prospective pipeline for new to market secondary product at discounted prices. Buyers and sellers should expect a supply contraction in these established family areas until demand forces sale prices to move upwards again.
Many reports agree that price stability followed by a gentle incline is expected throughout 2017. Dubai is a comparatively small market, which makes it susceptible to consumer sentiment; however, in settled areas there is little impetus forcing homeowners away from the UAE. In areas where expatriates are buying to live in the property, then, as always, location wins out over other factors and investor confidence seems cautiously bright and level-headed.
While the high level of luxury found in Dubai’s newer off-plan developments is a truly exciting benchmark for quality in the UAE, especially the new Mohammed Bin Rashid City communities, it will take time for these areas to establish themselves and allow a secondary market to flourish there. There will likely be some migration to newer prime communities over the coming years as they begin hand over, and it will be more important to upgrade older villas with contemporary finishes to compete, or price keenly for buyers to cost in renovations. Speaking to World Business Times, Rahail Aslam, Select Group’s CEO, has found an improvement in quality as the property market has matured. “I have generally found that newer developments are being delivered with [increasing] focus on quality and finishes so many existing owners and investors are reinvesting and upgrading to some of the newer properties. As the market in Dubai matures, the track record of a developer becomes very important. Customers want to see that they have delivered quality projects in the past.
The uncertainty triggered by Brexit and the US elections is certainly prolonging the decision-making process for buyers who are investing in second homes, perhaps still deciding in which country to base themselves, and analysing where to invest in the mid- to long-term. This untethered approach to location is not really down to internal factors in Dubai, so much as a fairly short-term interaction of international market influences. As Mr. Aslam suggests, this is nothing new for the region. “Geopolitical issues are not new in the region and generally speaking, business is likely to carry on in its usual cyclical fashion. With the opening of theme parks and other entertainment options, Dubai is on track to achieve its Tourism Vision 2020 target of 20 million visitors and with sustained government spending on infrastructure in the lead up to Expo 2020, our confidence in Dubai real estate remains firm and we expect the market to pick up in the coming year.
For those with global options, shopping for second homes undeniably carries an element of currency hedging that is unavoidable at the moment, so the reticence to commit for some may continue until worldwide trends become clearer. However, experience would suggest that luxury property simply never goes out of fashion. There are enough well-heeled property investors, either established or new to Dubai, who understand the appeal and opportunity that Dubai living affords them, which ensures steady growth for the luxury sector. Luxury real estate prices in Dubai remain buoyant, with recent levels of transactional activity being very encouraging and reflecting a positive bounce in the market. Overall, Mr. Aslam believes the outlook to be quite straightforward. “Development businesses need to keep a close eye on market fundamentals that could affect commerciality and delivery of [a] project. Businesses need to ensure good planning is in place and at the same [time] remain nimble to adapt to any market changes. [A] case in point is the launch of our latest project Studio One. Though in general the market is slow we were 65% sold out within two days of the launch. So, the market still has an appetite for investment provided it’s the right product.”