Dubai property outlook mixed in 2012, says JLL

With buyers becoming more selective and having more options to choose from, property prices in Dubai are expected to rise in some areas but remain stable or fall in other locations as performance becomes more asset specific.

"As the flight to quality continues in 2012, there will be an emphasis on better quality projects across all sectors," the report said. "There will also be a greater distinction between winners and losers as performance will vary greatly with preferred buildings outperforming others in an increasingly two-tiered market."

With real estate values having fallen more than 60% in Dubai since 2008, JLL believes that prices are near the bottom but will still take another year to achieve growth across all sectors. "2012 will be the year of recovery for certain projects, while 2013 will be the year of recovery for the market as a whole," said Craig Plumb, JLL's head of research for the Middle East and North Africa.

New supply to boost competitiveness

In terms of supply, JLL predicts that 23,000 units will enter the Dubai market this year as developers continue to consolidate projects and focus more on commercial viability. The new stock is expected to further boost competitiveness and force developers to target needs of occupiers more closely.

"Lower prices, more choice of higher quality product and its role as a regional safe haven will increase the attractiveness of the UAE market to both occupiers and investors in 2012," Plumb noted. "We can expect 'more' positive signals from this year, with some of the key words being affordable housing... new realism, tenant friendliness and sustainability across the UAE real estate market."

Commenting on the UAE real estate market as a whole, Alan Robertson, JLL's CEO for the Mena region, said the sector is evolving into a more mature marketplace where valuations and property and asset management will become increasingly important for occupiers, developers and investors.

However, he also warned that the market will continue to be impacted by regional and global events. "As we enter 2012, the real estate sector will inevitably be susceptible to any potential geo-political changes within the region, with the recent escalation of rhetoric between Iran and the West being the major cause of uncertainty. The worsening European debt crises and its impact on the global economy will be the other major external challenge to the UAE real