Dubai ranks as the third most affordable major global city for purchasing prime residential property, according to the findings of a new survey by Savills.
Savills' World Cities Prime Residential Index shows that Dubai property prices have dropped over the past five to ten years. This means that investors willing to hold property as an investment for a longer period of time can take advantage of attractive yields. In-house Savills research into prime residential rental yields, pinpoint Dubai as the fourth best global hub for returns on investment (4.6 per cent).
"It is a good opportunity for domestic and foreign investors to look at Dubai. Firstly, because the time is right as it is far more affordable to purchase prime residential property now due to lower transactional costs and overall lower prices when compared to other major cities. Investors are paying less for top class specifications. Secondly, strong rental yields mean that long-term investors could generate robust annual returns when letting out property in the city," said Swapnil Pillai, associate, Research Middle East at Savills.
Prime residential property prices in Dubai fell 1.9 per cent in the first half of the year due to an oversupply in real estate market that has been steadily contracting since mid-2014 as foreign investor interest cooled. Prime market prices declined 19.8 per cent in the past five-years to $600 a square foot "due to high levels of new build stock and global economic uncertainty," the Savills report said. Only London (down 18.1 per cent) and Moscow (down 15.1 per cent) reported similar price declines over the five-year period.
According to Knight Frank's recent Wealth Report, Dubai is the most affordable market for luxury property market among the world's top 10 cities as the average price declined 84 per cent from its peak level in the last five years. Average prime property price fell 3.4 per cent from $6,966 per square metre in 2017 to $6,729 per square metre last year, making the emirate's property cheaper than London, New York, Miami, Hong Kong, Singapore, Paris, Berlin, Shanghai and Sydney. Analysts forecast that the prime property prices will witness further softening in 2019 amidst increased supply and overall softening in real estate market and weaker economic background.
Real estate consultancy, JLL, noted that with residential sale prices falling at a slower rate than rents, the UAE's property market is likely to see an increasing number of end users buy properties rather than rent them. According to a Q2 report from JLL, rent prices for apartments fell by approximately 11 per cent, while sales prices fell by about nine per cent compared to the same time period last year.
"It is transparent that capital values in Dubai have not grown at the same rate as other global destinations over the past 10 years, but that is not to say that the next 10 years will mirror this. In Dubai, demand is still strong; however, a mismatch of supply and demand has compressed prices. As supply/demand balances out over time, prices will adjust accordingly, so investment towards the bottom of the cycle could be a shrewd move," it said.
Price growth across the world's leading prime city housing markets has continued to slow during the first half of 2019, rising by just 0.4 per cent, taking the annual growth to 0.7 per cent. This compares to an annual increase of 5.1 per cent in the year to June 2018.
"There are a number of reasons why the prime residential markets in global cities are seeing a slowdown, with government policy, the cost of money, increased supply and global economic uncertainty all playing their part," said Sophie Chick, head of Savills World Research. "Despite this, we do not expect significant price falls across the index, but that growth will remain flat or experience small increases in value in the medium term."
The latest data from Savills World Cities Prime Residential Index shows that Berlin and Paris have seen stand out growth for prime residential property of approximately four per cent over the last six months and eight per cent over the last year. Both markets have low supply levels coupled with increasing demand from domestic and international buyers.
Copyright © 2019 Khaleej Times. All Rights Reserved.