Maturing Dubai property market results in strong secondary sales

Completed villa units in the Arabian Ranches, Meadows, Jumeirah Islands and Springs typically demonstrate 50 - 70 per cent capital appreciation within two to three years. Apartment units in The Greens have appreciated by approximately 100 - 120 per cent, whilst apartments in Dubai Marina are reselling at 40 - 55 per more than the original cost.

The report also finds that investment buyers who entered the market early have recorded residential property price rises of up to 200 per cent between 2002 and the end of 2006.

On average, the price of two-bedroom and three-bedroom villas has increased from AED 474,000 and AED 705,000 to AED 1,360,000and AED 2,110,000 respectively. Over the past four years, individual villa prices have increased by as much as 226 per cent, with the average price per sq. ft. rising from AED 331 in 2002 to AED 764 in 2006.

Apartment prices show similar price rises with studios and three-bedroom units increasing from averages of AED 194,000 and AED 1,475,000, in 2002, to AED 554,000 and AED 2,410,000 by the end of 2006, with the average price per sq. ft. rising from AED 533 to AED 949.

John Davis, CEO, Colliers International - Middle East, said:

"Within the numerous foreign ownership zones, speculative investments have been surpassed by the appetite from owner-occupiers, especially for properties that have been completed or are nearing occupation. This is leading to an overall maturing of the market and the development of an established secondary market, comprising investors with residential projects in Dubai who have incurred dramatic capital increases on resale."

"Dubai has been a shrewd investment for buyers over the last four years, with demand for housing acting as a catalyst for increased prices. While we expect the trend to continue in the short-to-medium term, the market will eventually go through a period of correction and become more stable."

One contributing factor in fostering market stability will be the large number of homes coming on stream over the next four years.

Colliers International estimates the total number of apartments and villas planned for completion by 2010 will be between 170,000 - 240,000 units, of which 110,000 apartments and 16,500 villas have been confirmed by Colliers International Market Research.

"Following the increasing competition between developers, we will begin to see supply catching up with demand leading to a softening of rents and occupancy rates." said Davis.

To counteract this, developers are increasingly forced to offer attractive financing options, incentives, and invest heavily in marketing campaigns. For example, from a maximum loan to value (LTV) mortgage of 75 - 80 per cent on most developments being offered as recently as 12 months ago, promotional offers of up to 97 per cent LTV mortgages are now being offered with loan maturity periods of up to 15 - 25 years at 6.5 per cent - 7.75 per cent interest rates.

Colliers International will be located in Hall 4, stand number 4B40 at the Cityscape exhibition, which runs at the Dubai International Exhibition Centre on the 4-6th December.