This autumn a subtle shift has taken place in the Dubai property market. No longer are off-plan sales the main focus of interest, with speculators buying apartments on the release of developments with a small down payment. Instead it is the re-sale market of existing properties that is hot.
Open the classified advertisements section of a local newspaper and there are far fewer adverts for off-plan apartment towers than earlier this year. Rather the pages are full of completed properties looking for a buyer, although significantly the number of properties actually available seems to be falling.
Adverts saying: 'Wanted Property, Immediate Buyers' are not uncommon. For the simple reality of the Dubai property market this autumn is a shortage of apartments and villas to rent and buy.
This is down to two factors: Dubai's local economy is growing at a very rapid speed; and construction projects are plagued by delays which have slowed the speed of delivering new apartments and villas.
Villa prices rising
The effect on prices is clearly to renew the upward momentum lost over the summer. At the moment villa prices seem to be rising in value fastest.
It has always been rather odd that villas were initially priced at less than apartments – mainly because they are cheaper to build – while buyer preference for villas has always been evident. When the first Dubai Marina apartments were launched, for example, the longest list of applicants was for the limited stock of villas at its ground level.
In most cities of the world houses sell for more than apartments, not the other way around. Part of the reason for this is the value of the land on which villas sit. In short you get more land area with a villa than an apartment – gardens are not just fun, they also have a land value.
Not that a Dubai villa is expensive in global terms, even after recent house price inflation. For instance, the standard $700,000 villa in The Meadows would cost more than twice as much in southern England for a house of similar floor space and garden.
Could it be that the speculators who have bought dozens of luxury apartments off-plan in Dubai have bought the wrong type of property? Will villas in places like the Arabian Ranches and Jumeirah Islands offer a better long-term investment?
All property markets change as they mature to reflect fundamentals of supply and demand. If the supply of villas is relatively limited and has the highest level of demand then the effect on prices can be predicted.
For while Dubai is building a huge stock of high-rise apartments at present, there seem to be not enough villas to keep up with demand, as anybody out trying to rent one at present will testify – rentals are up around 50% this year, ahead of villa price rises so far.