Dubai property prices climb by up to 18% in Q1

The consultancy's Q1 2013 Market Overview reported that apartment prices had risen 18% in the first quarter compared to the same period last year, while villa prices were up 17%, according to the REIDIN general Residential Sale Index.

However, they both remain below their peak values in Q3 2008, with villas 8% less and the apartment index 22% lower, the report noted.

JLL also said the market's positive performance is concentrated in the best quality projects in prime locations with secondary locations and poor quality projects continuing to experience high vacancy rates and stable or even falling rental values.

The report follows news that hundreds of people stood in line for days this past weekend at Emaar's sales office in Downtown Dubai waiting to purchase townhouses in the developer's latest offplan project near Arabian Ranches.

"An initial glance might suggest that many of the conditions that led to the unsustainable growth in real estate prices in Dubai in 2006 and 2007 have returned," Alan Robertson, CEO of Jones Lang LaSalle, Middle East & North Africa. "However, there are important differences as the Dubai market has matured. The excesses of the last speculative boom will hopefully be replaced by a period of slower but more sustained growth in demand and prices. The challenge is to ensure that this confidence does not lead to undue exuberance. If the market has learnt anything from the past decade, it is that an extended period of sustained growth is far more beneficial than a short period of unsustainable growth followed by an inevitable crash."

While the villa rental index achieved its peak value in February 2013, the apartment rental index remains 26% lower than in January 2009, the report added. JLL said rentals have increased in the most sought-after areas such as Burj Downtown, Dubai Marina and Palm Jumeirah, while remaining stable in secondary and less completed locations.

As of Q1 2013, the total residential stock in areas monitored by JLL stood at around 357,000 units. Around 2,200 residential units, mostly apartments, have been handed over in Q1, the report added. A total of 28,000 dwellings are expected to be completed in 2013, while around 40,000 residential units are scheduled to enter the market over the next two years, which will represent an 11% increase on the current stock.

Most of the upcoming residential supply will be located outside central Dubai in areas south and east of the city.

"On the development side, the new projects being launched are as ambitious as ever," said Craig Plumb, Head of Research at Jones Lang Lasalle in Mena. "We are however seeing signs of a more considered and targeted approach which is only going to benefit the long term health and credibility of the real estate sector. The key to the success of individual projects and the future performance of the overall market will be the adoption of a realistic phasing strategy in line with market demand."