“Cooling” Measures Temper Price Growth in Q4 2013
At the tail end of last year, signs began to emerge that the Dubai government’s efforts to cool the residential property market were paying dividends. Admittedly, in annual terms, both prime apartment and villa prices saw double-digit increases of 15% in Q4, however, the growth rates were at their weakest levels since mid-2012.
But the slowdown hasn’t come as much of a surprise. After all, a number of measures have been introduced in order to address concerns that another speculative bubble is forming. For example, between September and December, the Dubai Land Department increased the transfer fee from 2% to 4%, Emaar speculated on banning property agents from fl ipping off-plan property before handover and the Central Bank announced new mortgage caps for both expatriates and UAE nationals. All of this helped to reduce transactional activity across the wider residential sector in the fi nal part of last year.
That said, at the end of November 2013, it was announced that Dubai would host Expo 2020. This not only provided a strong boost to confidence, but also put the emirate back in the spotlight. What’s more, developers responded by announcing a number of mega residential projects, albeit the recent trend of falling lending to the real estate sector suggests that perhaps not all of these will reach onsite. In addition, it is worth noting that most of these schemes are at the midrange of the market, rather than prime.
Nevertheless, this year’s supply pipeline isn’t small; new prime residential units (with a value of AED 10 million or over) are expected to be equivalent to just under 10% of existing stock. However this fi gure should fall to just 1.6% in 2015, before rising to 4.6% in 2016.
Source: Knight Frank