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Dubai: The squeeze on Dubai’s property values getting too ahead of what can be deemed sustainable is paying off handsomely. The impact is most telling within the top-end of the residential marketplace.
A new report from the consultancy Knight Frank finds that high-end homes in Dubai saw value gains of 6.3 per cent in the first months of the year. That is a relatively toned down growth pattern given that values for such properties in the first three months of the year were up 11.7 per cent. (Some private sellers have unilaterally cut down their asking prices seeing the writing on the wall.)
According to market sources, new supply — and in substantial numbers too — such as Nakheel’s recent announcement of a new community of 1,000 villas will reduce the scope for sharp mark-ups in prime properties. Another launch, the Royal Estates project involving an alliance between three private developers, will create 2,000 homes at Dubai Investments and includes townhouses priced upwards of Dh1.6 million.
“While there will always be investors interested only in trophy purchases in Dubai, the rest of the market is being driven by long-term buyers and end-users,” said the head of a brokerage firm.
“Where they had few choices earlier — and those already had steep premiums attached to them — they now have the flexibility to choose from a wide selection of new projects and multiple property formats.”

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In the backdrop of an eventful year of strong market performance and the Expo 2020 win, Dubai is entering the new year with enormous positive sentiment. The outlook for 2014 is very positive as property prices are expected to maintain their upward trend, with more launches slated for the next 12 months or so. Dubai’s property market has been seeing a strong growth trajectory, which experts believe will prevail even in 2014, and will continue until 2020 at the least. Dubai received a further boost due to the World Expo 2020 bid win — an event that will host 20 million tourists annually and create 277,000 jobs.

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House prices in Dubai rose by a world-beating 28.5 per cent in the 12-month period ended September 30, 2013, according to property research firm Knight Frank.

The report maintains that the average global house prices reached a new peak in the most recent quarter, surpassing their previous peak in the second quarter of 2008, after which the subprime crisis led to a worldwide decline in property and asset prices.

Now, more than five years after the decline set in, prices have once again scaled to new peaks, according to Knight Frank’s Global House Price Index, which tracks mainstream residential prices in 53 countries, as well as city states Dubai and Hong Kong.

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Dubai housing’s meteoric rise of 28.5 per cent year-on-year is followed by China’s 21.6 per cent and Hong Kong’s 16.1 per cent. “The index’s strong performance has been assisted not just by headline grabbing price rises in Dubai, China and Hong Kong, but also in a number of emerging markets,” says Kate Everett-Allen, the author of the Knight Frank report.

The Index shows that house prices in Dubai have surged by 11.8 per cent in the past six months, and by 4.5 per cent in the previous 3 months. In addition, with the emirate winning the rights to host World Expo 2020, a number of analysts now maintain that this will see a new growth chapter for Dubai and the UAE’s economy, and property prices may continue to rise in the near future.

In the preceding quarter too, Dubai witnessed a record rise when house prices rose by 21.7 per cent year-on-year, also the most in the world. Dubai house prices surge the most in the world. Dubai was then followed by Hong Kong (19.1 per cent) and Taiwan (15.4 per cent). However, this quarter the gap between Dubai and the rest of the world has grown larger, with prices in Dubai clearly breaking free and racing towards the 30 per cent-mark.

A number of key emerging markets recorded price growth of more than 10 per cent, including Taiwan (15.4 per cent), Indonesia (13.5 per cent), Turkey (12.5 per cent) and Brazil (11.9 per cent) in the year.

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First quarter of 2014 sees Dubai’s prime rents surge by 6%, the most in the world

More people are considering purchasing a house in Dubai for living in it as the increase in the emirate’s house rents outpaced all global destinations in the first quarter of 2014.

According to global property consultancy Knight Frank’s latest Prime Global Rental Index, house rents in Dubai grew at 6 per cent in the three months ended March 2014, the most in the world, followed by Tokyo (5 per cent) and Geneva (4.1 per cent). “Dubai and Tokyo recorded the strongest rates of growth with prime rents rising by 6 and 5 per cent, respectively, in the first three months of the year,” it noted.

IMG_5086Prime residential rental growth in Dubai continues to outpace that of the traditional financial centres of London and Hong Kong, says Kate Everett-Allen of Knight Frank’s international residential research. “Some of the world’s top financial centres – Singapore, London and Hong Kong – are positioned at the bottom of the rankings with annual falls of -0.3, -2 and -6.3 per cent, respectively,” the report states.

The consultancy says that Dubai’s increasing prime residential rentals, which are outpacing wage inflation, are a major factor leading residents to consider buying a home in Dubai. “In Dubai, prime rents continue to outpace wage inflation. This is raising concerns about affordability and is leading domestic and expat buyers alike to consider purchasing a home,” the report maintains.

Year-on-year, however, Dubai is outpaced by Kenya’s Nairobi, where prime house rentals surged by 25.8 per cent in the 12-month period ended March 2014, compared with Dubai’s 16.4 per cent rise during the same period.

However, the Nairobi market seems to be cooling off, says Knight Frank, with rents in the latest quarter showing only a small increase. “There are signs the [Nairobi prime rental] market is cooling with growth of only 2.1 per cent recorded in the first three months of 2014,” Everett-Allen notes.

House prices and rents in Dubai have been surging for the past 24 months, with authorities taking steps to control the rally in order to avoid any risks of overheating. “The introduction of a mortgage cap and higher transfer fees at the end of 2013 has led some to defer this decision [of purchasing a home in Dubai],” Knight Frank says.

As Emirates 24|7 reported last week, after rising by the most in the world for a year, prices of Dubai’s prime residential property grew by just 1 per cent quarter-on-quarter in the first three months of 2014 as a result of active intervention by the authorities to weed out unnecessary speculation from the emirate’s property market.

Knight Frank had noted in its previous report that the “double whammy of higher transfer fees and the new mortgage caps are having their desired effect, although the latter has been especially effective in dampening buyer activity.”

It added that Dubai’s “residential prices will resume on an upward path in the second half of this year.” Dubai house prices to rise again in second half of 2014: Knight Frank

The consultancy cited strong economic conditions, a well performing labour market and prospects of loosening credit standards for buyers to suggest that demand for prime residential property will see an uptick in the short-term.

According to the firm, “despite the significant price growth seen over the past couple of years, it is difficult to argue that Dubai’s prime residential property is expensive by international standards.”

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