The Al Habtoor City project is back to making headlines. Dozens of offers have poured in for $55m (AED200m) penthouse at Al Habtoor City on Sheikh Zayed Road, which is the costliest apartment currently on sale in Dubai. A decision on the eventual buyer could be taken shortly for the unit that takes up three levels at the G+73-storey Noora Tower in AHC.
Umar Bin Farooq, Director at One Business Group (estate agent with exclusive sales and marketing rights for the tower) said: “We are calling in letters of intent for the penthouse, which will be 30,000 square feet. The tower will be completed by December, but the intention is to confirm the buyer well before so that he can provide inputs on how his property should be. Despite the multiple interest, we will not engage in an auction process to finalise the buyer. We don’t want a bidding war. Instead it will be done through internal vetting in collaboration with the AHC master-developer, the Al Habtoor Group.”
Noora Tower is part of a mixed-use development that enjoys prime access to the Dubai Water Canal and features prestige hotel brands such as W and St. Regis. The entire area already occupies a heightened degree of prominence, brought on by the convergence of the Canal and its location off Shaikh Zayed Road. Two further high-rises are in development, but these are not freehold.
Another penthouse is aiming to break the record for the most expensive apartment available, this one by Omniyat Properties’ at its One Palm Jumeirah project. Again, the developer has fielded multiple enquiries and to date has not officially confirmed that a buyer has been identified.
AHC’s Noora Tower will have three more penthouses, considerably less expensive, at $16m (AED60m) each.
The most expensive properties in Dubai’s freehold clusters have been a couple of villas valued more than $55m (AED200m) at Emirates Hills and the Palm. There was another Palm property that sold for more than $49m (AED180m) in recent years.
Demand for super-luxury properties remains modest at the moment, with investors’ preferences shifting to mid-market and reasonably priced properties. Dubai’s developers have also started catering to the buyer demand for less expensive properties of smaller dimensions.
Farooq said: “Right at the top end of the market, there are always investors who want to pick up trophy assets. They may take their time, but they are very much there.”
Dubai’s Residential Market
Values across Dubai’s freehold residential areas slid by 8.8 per cent in 2016, largely in line with Cluttons’ original forecast for the year of –10 per cent. This signals the market’s weakest annual performance in five years, and sits 28.7 per cent below the Q3 2008 market peak.
Faisal Durrani, Head of Research at Cluttons, said: “While local economic drivers may appear robust, regional and global economic uncertainty has undoubtedly curtailed domestic growth. Despite this, the off–plan residential sales market has remained resilient and in fact accounted for 53 per cent of all deals in 2016, suggesting that investor confidence remains strong. Clearly this has been aided by some exceptionally favourable payment plans that stretch beyond handover, negating the need for financing from the get–go, in addition to attractive gross rental yields.”
Durrani added: “Tenant demand has undoubtedly eased over the last 12 months. This contributed to the 9.9 per cent drop in average rents last year. The rate of creation of senior level executive positions has fallen and this is reflected in the lower level of enquiries and budgets we are recording. The redundancy programmes in the city’s finance & banking sector and oil & gas sector have all but run their course, but the weak global outlook is putting other key sectors under pressure, including the hospitality and aviation sectors. The rapid and sudden strengthening of the US dollar over the last 9 months has added to the challenges faced by the property market.”
Cluttons latest report also finds that a limited number of vacant plots remain within the Mohammed Bin Rashid loop, suggesting that the resilience in values is likely to persist as new opportunities to purchase in this submarket start to diminish. In fact, there was a 47 per cent drop in the number of units launched in Downtown Dubai during 2016, with just 1,431 new homes released, compared to 2,104 unit launches in 2015.
Murray Strang, Head of Cluttons Dubai, said: “Aside from the ultra–luxury of the Burj Khalifa tower, the lifestyle appeal of Downtown Dubai has in a way insulated the market’s performance from the fall out of global geopolitical events. Bahwan Tower for example, which is located within the Burj Khalifa community, launched in November 2016 and is a prime example of sustained demand, as a strong sales performance continues ahead of a Q4 2017 completion.”
Strang added: “Our view is that the rental market’s fortunes remain tied to the looming Expo 2020. At this stage, the mega event is one of the primary upside risks to our outlook. We know from experience that the lag between the take up of office space and the subsequent impact on the residential rental market is usually six to nine months. Construction contracts worth $3bn (AED11bn), linked to the Expo, are expected to be announced throughout the course of 2017, driving up the rate of job creation and tenant demand in its wake, but this is not expected for another two to three quarters at least.”
Durrani highlighted: “Before the ‘Expo effect’ ripples through the market, we expect that rents will continue moderating during 2017, with an average decline of 5 per cent to 7 per cent likely over the course of the next six months. A key factor in the rental market’s fortunes will be its ability to absorb the strengthening stream of buy–to–let homes, which has already upset the delicate supply–demand equation. Any impact on the sales market will likely follow, however for now we anticipate capital values will moderate by a further 5 per cent on average before there is the potential for a more stable picture to emerge towards the end of 2017.”