Service charges a major factor in New Dubai apartment resales

The 950 shoreline apartments on the trunk of The Palm Jumeirah are styled as a series of smaller, 10-storey blocks with their own strip of beach, private gym and swimming pool facilities.

Here the service charges are currently Dhs12 a square foot but expected to rise to Dhs16 in the New Year. The club facilities are currently included in the Dhs12 charge; however this policy is under review and a Dhs10,000 per annum additional charge is under consideration.

Thus the service charge on a three bedroom shoreline apartment could rise from around Dhs27,000 at present to Dhs45,000 per annum, inclusive of club access. Agents say this service charge also reflects the prestige of the location of the 950 shoreline apartments, and the likely cost of maintenance of beaches on reclaimed land.

JBR views

On the other hand, the 6,600 apartments of the nearby Jumeirah Beach Residence are offering better views, and it has to be admitted that only a few of the shoreline apartments have full sea views. Meanwhile the cost of the JBR service charge is Dhs9.5 per square foot, including the club facilities.

This differential in service charges - and clearly the gap looks likely to be getting bigger and not smaller - is having an effect on the resale market.

It was already quite a test of the absorption rate for high-end properties to introduce so many apartments to the market in one location at the same time. To adopt sharply different service charge fees has skewed the market in favour of the JBR.

Owners of the shoreline apartments are not happy. The resale prices of their apartments are lower than expected, and the volume of transactions is lower while the inventory of available property is considerable, giving buyers a lot of choice.

Rental discounts

Shoreline apartment investors are now offering their apartments at very competitive rentals to make sure that they have some money coming in to cover their finance costs and the service charges. This clearly means a rental bargain, for these are fine apartments with unique facilities, albeit the busy construction activity on The Palm is still a consideration.

The same could be said for the JBR whose residents have to cope with the feverish building activity behind them in the Dubai Marina. But at least they have the comfort of knowing that they are paying a lower service charge than their neighbours on the Palm and generally have a better sea view.

On the other hand, both apartment developments provide a superb beachfront location in the centre of New Dubai, and in the long run this location will be the factor that makes both developments a success.