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Highlighting the fact that real estate investments pay off based on three critical factors ? location, location, location ? property consultancy CB Richard Ellis said in a new report on Tuesday that rental rates of Dubai villas in select communities have gone up by more than 20 per cent within one year.
Two-bedroom villas in Dubai?s freehold community the Springs, located on Sheikh Zayed Road, saw the highest increase in lease rates, the agency said in its quarterly update on Dubai?s property market.
?A 2-bedroom villa in the Springs, which was achieving a lease rate of Dh70,000 to Dh85,000 per annum in Q1 2011 [is] currently being offered in the range of Dh85,000 to Dh100,000 per annum ? depending on the location and quality of the villa,? CBRE said. That?s an increase of between 17.6 and 21.4 per cent.
?Areas offering an established community environment, combined with quality amenities and facilities continue to see the most impressive levels of growth and also remain in relatively short supply,? the research and property management consultancy noted.
In aggregate, said CBRE, the emirate?s villa rentals saw an uptick for the first time since 2008-09, with average lease rates for Dubai?s villas going up by 3 per cent quarter-on-quarter, but are still 1 per cent below what they were a year ago.
Within the villa segment, quarter-on-quarter rentals of freehold properties saw a 3 per cent rise in Q1 2012 while villas in leasehold areas saw rentals appreciating by just 1 per cent. ?The highest increase in lease rates took place in the two-bedroom sector at 5 per cent, followed by five- and six-bedroom units which both increased by around 3 per cent,? the report stated.
?For apartments, the highest increase in Q1 2012 was for one-bedroom units, which grew by 2 per cent during the quarter, whilst 3-bedroom units grew by 1 per cent,? CBRE pointed out. ?Within the emirate?s freehold areas, the highest increase in lease rates took place in Greens at 7 per cent, followed by Downtown Dubai where rates grew by 6 per cent,? it added.
?In the economy itself, the real estate sector continues to see some localised growth with an increase in the number of transactions for residential properties,? CBRE highlighted.
Overall, citing Dubai Land Department data, CBRE said quarterly transactions in Dubai?s residential market totalled Dh3.1 billion, an increase of 9 per cent over the previous quarter.
However, CBRE added that non-prime residential locations will continue to witness a deflation in lease and sales rates.
?Emerging residential locations such as International Media Production Zone, Dubai Sports City ( DSC ), Dubai Silicon Oasis, Dubai Investment Park and Jumeirah Village continue to see deflationary pressures on lease and occupancy rates due to the current lack of facilities, amenities and developed infrastructure,? it said.
?Lease rates in DSC range between Dh30,000-Dh36,000 per annum and Dh40,000-Dh55,000 per annum for one and two bedroom units respectively, unchanged from the previous quarter,? CBRE said.
?On a year on year basis, apartment lease rates in emerging locations have fallen by around 7 per cent, with high vacancy rates prevailing,? it added.
Gazing at their crystal ball, CBRE analysts said Dubai?s residential sector will continue to witness ?area-specific strengthening of lease, sales and occupancy rates as pipeline supply in developed locations has become increasingly scarce.?
The agency believes that the market for established villa locations such as Emirates Living, Arabian Ranches and Palm Jumeirah will remain string during 2012 with limited new inventory expected in these locations.
Nevertheless, Dubai?s overall villa supply, which remained more or less stagnant in the past few years, will swell up, with new supply expected in ?emerging areas such as Jumeirah Park, Al Furjan and Jumeirah Golf Estates, which will result in expanding villa inventory in the next 12 to 15 months,? CBRE concluded.
Dubai rent recovery: JLT getting costlier
Residential rents in the Jumeirah Lakes Towers (JLT) master community are rebounding, with lease rates rising by over 10 per cent, quarter-on-quarter.
This is likely to witness a further increase since the start of a feeder bus service earlier this month.
Data provided by PropSquare Real Estate reveals rents of one-bedroom apartments have gone up to Dh45,000 to Dh60,000 per year in the first quarter 2012, compared to Dh40,000-Dh45,000 in the fourth quarter 2011.
Rents for two-beds have jumped from Dh60,000-Dh70,000 to Dh70,000-Dh80,000, while three-bedroom units are available from Dh90,000-Dh110,000 compared to Dh80,000-Dh100,000.
Asteco in an earlier report said that the hike was more moderate. Rents in JLT had gone up by four per cent in the first quarter compared to fourth quarter 2011.
Studios were available for Dh35,000 pa, one-beds for Dh 45,000, two-beds for Dh 65,000 and three-beds for Dh90,000 pa.
Information provided by Harbour Real Estate reveals rents have remained stable for one- and two-beds, while studio and three-bedroom apartments have seen a decline.
Studios were leased on average for Dh42,500 pa in the first quarter, down from Dh45,000 last year, while three-beds are available for an average of Dh120,000 compared to Dh130,000 last year.
Average rents for one- and two-beds continue at Dh60,000 and Dh82,500 pa, respectively .
Jan Tabrizi, Manager ? Residential Sales & Leasing, JLT Office, says: ?Rents have increased due to JLT being popular for both commercial and residential purposes.
?There are two Metro stations serving this community, therefore, it is easy access for people that live or work in these towers.
?Also the apartments in JLT are usually very spacious and there are plenty of walkways by the lakes and lots of amenities for residents.?
She believes that rents will go up by further five to seven per cent since the feeder bus service started in May.
Emirates 24|7 reported earlier that Dubai Multi Commodities Centre ( DMCC ), master developer of JLT, had put back on track three ?stalled? projects last year.
In 2012, it expects three commercial towers, one residential and two hotel & hotel apartments to be completed in JLT. Four office towers were completed in 2011.
JLT is a waterfront community, comprising 87 residential, office and mixed-use towers.
In June 2011, DMCC told this website that no projects have been cancelled to date in the master development.
The master development comprises 26 clusters of three towers or trios, with each trio having two towers of the same size and one tower that is five floors taller.
The man-made lakes that consist of four separate water bodies will cover 179,000 square meters and will be approximately three-metres deep.
Dubai property prices bottomed out in Q1
Property prices in Dubai appear to have bottomed out in the first quarter of 2012 and are starting to firm up despite the existing oversupply and a decline in rents in the outskirts, a Kuwait investment bank said on Monday.
In contrast, the sector in Abu Dhabi is expected to maintain its downward trend over the next year due to fresh housing deliveries, Global Investment House (GIH) said in a 50-page report on the GCC real estate sector.
?We suspect Dubai residential selling prices could have bottomed out between 4Q11-1Q12 and are entering a stagnant phase of stabilization with selective price increases a pattern already materializing in well established areas and for selective properties,? the report said.
It said both villa and apartment offerings in the Gulf?s main business centre saw minor price increases in Q1 after stabilizing in the second half of 2011.
?We estimate the Dubai market is currently 20 per cent oversupplied, which means that 67,000 units are currently vacant. We expect this figure to increase as an additional 20,000 units are scheduled to enter the market in 2012 representing a six per cent increase on the current stock.?
GIH said the pace of decline in Dubai rents slowed down significantly in 2011 and is starting to shift gradually into what it described as selective increases in areas of higher quality and demand.
?We expect improvements in rental rates to be capped in the short term by new supply and declining rents in the outskirts of the city.?
In Abu Dhabi, rents are dropping on new supply and rental yields, currently at around 7.2 per cent, are being compressed converging with Dubai yields, which the report estimated at a current 6.6 per cent.
?In Abu Dhabi prices are still declining as new supply enters the market,? GIH said, adding that villa prices dropped seven per cent between 1Q11 and 1Q12. Apartment prices declined by about eight per cent during the same period and were down five per cent in 1Q12 alone on quarterly basis. ?We expect further declines to materialize for at least the coming four quarters.?
According to the study, vacancy rates in the capital are estimated at 15 per cent of 4Q11 stock of 195,000 units. A fresh supply of 25,000 units is scheduled to enter the market in 2012, which has already impacted property prices in 1Q12. ?We expect Abu Dhabi to be negatively affected by growing supply through to 1Q13 despite the current rationalization in property delivery.?
291 projects on hold likely to qualify for restart
A total of 291 projects are on hold in Dubai as of March 31, 2012 ? but are likely to see the light of day.
Each of these 291 registered projects are likely to qualify for either the Tayseer or the Tanmia initiative, the Dubai Land Department (DLD) has stated in the planned sovereign bond prospectus.
Real Estate Regulatory Agency has been quoted in the prospectus as saying that 165 projects have been completed since the beginning of 2009; 291 projects are on hold; 291 projects are likely to be completed in due course, while 29 projects have not yet commenced.
A bond prospectus posted on the London Stock Exchange last year said 217 property projects had been cancelled as of May 31, 2011.
?The current market situation has led to the re-evaluation of a number of real estate projects and delays in many projects. Since the middle of 2008, a number of real estate projects have been cancelled or delayed, principally reflecting liquidity shortages for developers, decreasing headline real estate prices and rental rates,? discloses the new bond prospectus.
A total of 154 projects had been reviewed under the Tayseer programme, launched in July 2010, of which 40 projects qualified under the required criteria.
These criteria require that projects have adequate infrastructure planned or in place; the escrow trust account is properly managed and financial reporting is full and timely; the technical report must show that a minimum of 60 per cent of construction is completed and that a minimum of 60 per cent of the project is sold.
This year, as per the prospectus, the Tanmia initiative is expected to include 33 projects, two of which have been launched. The initiative is designed to increase investor confidence in those projects, which the Dubai Land Department has identified as qualifying for the Tanmia program.
On Wednesday, the ICD-Brookfield, a $1-billion Dubai-based real estate fund, joined the Tanmia initiative, taking the total number of participants in the programme to 12.
Dubai, as of March 31, 2012, has 596 registered developers and 852 registered brokers.
In 2011, DLD reported Dh94 billion of villa-related property transactions and Dh43 billion of apartment-related property transactions. Nine per cent of all real estate transactions last year were conducted by first time real estate investors, with the highest number of such foreign property investors by value being from India, followed by Pakistan, the United Kingdom, Iran and Russia.
Expectations of attractive rental yields largely account for such investment decision.
Earlier this month, Jones Lang LaSalle said that the Dubai residential real estate market appears to have bottomed outwit prices now at rates similar to early 2008 levels.
In March, Knight Frank said real estate in Dubai had not only stabilised, but prices had increased by 2.3 per cent on average in the last quarter of 2011.
Dubai residential market prices back to early-2008 levels
The Dubai residential real estate market appears to have bottomed out as prices are now at rates similar to early 2008 levels and the general rental trend being positive, Jones Lang LaSalle said on Monday.
Dubai is expected to see completion of 28,000 new units in 2012 with Dubailand and Jumeirah Park likely to see completion of 4,380 and 4,242 units, respectively.
Other freehold locations that will see additional supply are Dubai Marina (3081 units), Jumeirah Village (3891 units), Dubai Silicon Oasis (1956 units) and International City (1,813).
Approximately 3,000 additional residential units were added to the market in the first quarter 2012, bringing the total current residential stock to around 341,000 units.Almost 90 per cent of the completions in 2011 were apartments, JLL said in its first quarter report on Dubai real estate.
The 44 per cent of residential stock added in the first quarter is located within the submarkets of International City, Dubai Marina, Discovery Gardens, Jumeirah Lakes Towers and Dubailand.
Real Estate Regulatory Agency CEO Marwan bin Ghalitha has said that Dubai will see release of 16,000 units this year. JLL?s estimate is 75 per cent higher than Rera?s assessment.
?While liquidity is returning to the residential market and some previously stalled projects are recommencing, we expect that a substantial proportion of the supply due to enter the market in 2012, much of which was initially due to complete in 2011, will experience further delays,? the report said.
Quoting the Reidin Residential Sale Indices, JLL said the residential market ?looks to have bottomed out,? with prices currently at rates similar to early 2008 levels.
Despite seeing a sharp fall from its peak levels in the third quarter 2008, the villa market began to see some uptick towards end-2011.
?This trend has continued into 2012 with sale indices now three per cent higher than in January 2008,? the report said.
Villa sale indices are still 25 per cent lower than at their peak in third quarter 2008. Apartment sale indices have also begun to stabilise, but remain at lower levels, 34 per cent down on the peak in Q3 2008.
Reidin rent indices from January 2009 show a similar trend with villas back at 2009 levels by the beginning of 2012.
?The general rental trend across the market is positive. Whilst villa rents have increased five per cent, apartments are 30 per cent lower relative to 2009 levels and continue to lag,? the report said.
The general residential indices 12 per cent higher than in first quarter 2011. The villa market is expected to continue to outperform the apartment sector. The prime residential assets in well established locations continue to see improved performance, while secondary buildings and locations are still suffering from rental and pricing declines, JLL stated.
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