Welcome to
the Edwards and Towers Monthly Property Basket. We have selected 8 apartments
and 8 villas which are trading frequently in the Dubai marketplace, and have
been tracking their values since the start of 2013 as part of the operations of
our RICS-qualified Valuation Department.
Each month
we will release a new Property Basket with the latest prices, and the
percentage changes. The values in the basket are based on actual transactions we
have witnessed, and not list prices (which can sometimes be distorted).
Apartments
The residential market in Dubai underwent
significant changes during the month of October. The introduction of the 4%
transfer fee has imposed a notable restriction on buyers, who are typically
being made to pay the full 4% despite the Government guidelines. Additionally,
the announcement of the 75% mortgage cap from December 1st will
further increase the initial capital requirements for mortgaged buyers.
Already, this has had a negative impact on transaction volumes of certain
sections of the markets, specifically the higher-priced properties.
Another notable impact throughout October has been
the looming Expo 2020 decision. Ironically, this has had a negative impact on
the market because sellers have raised their prices significantly beyond
current market levels in the expectation that prices will rise following a
successful Dubai bid. However, we anticipate that the impact of a decision
either way will have a minimal impact as the event is 7 years away.
As apartments are generally lower in terms of
capital required, they have continued to transact at a reasonable rate. One of
the most notable patterns emerging is that there has been more of an improvement
in properties at the lower end of the price spectrum, which we anticipate is
because of the increased transfer fee. The Greens has witnessed the most
activity from the basket, as affordability is increasingly becoming the most
important factor in the apartment market.
Villas
Activity in the villa segment was notably more subdued than the
apartments, primarily because of the higher capital lot size required. First
time mortgaged buyers, even for a villa of AED 2,000,000, will have to find AED
500,000 deposit, AED 80,000 transfer fee and AED 40,000 agency fee to enter the
market as of December 1st. This upfront cash requirement of AED
620,000 is simply too much for many young buyers looking to enter the market
for the first time.
Additionally, the mortgage cap regulation stipulates that for properties
over AED 5,000,000 the LTV will be capped at 65% for expats. This will again
increase the capital required for villas in some of the more popular expat
areas such as Arabian Ranches and Victory Heights, where the average price is
above this level.
Overall, the properties surveyed in the basket remained flat, and the
growth since the start of the year is now at a similar level to the apartments
as the lower end of the market begins to catch up in terms of growth. The
sellers of Garden Homes on the Palm Jumeirah are becoming increasingly
ambitious with their price expectations, and volumes here have suffered as a
result. At the other end of the market, however, there is still some activity
with townhouses where entry levels are lower.
For more details, or to request a copy of the latest research note, contact our Director Simon Kennedy on simon@edwardsandtowers.com or +971504515226.
