Saturday 23 June 2018

Property price rise deters first-time home buyers

DUBAI, September 2, 2014

The rise in property prices has resulted in fewer sales transactions in the second quarter of the year and diverted potential first time home buyers to shift their immediate attention to continuing to rent in Dubai, UAE, a report said.

Meanwhile, some other home buyers are taking more time to make decisions on when and where they should invest, added the Q2 Market Summary released by the Dubai-based Mena Properties Services (MPS), a leading real estate company.

This market condition in Dubai has also been caused by the increased transfer rates and the reduced borrowing amounts offered by the mortgage providers which have been recognised across the media platforms, the report pointed out.

Many of the transactions witnessed by MPS are at pre-Expo 2020 announcement prices (averaging 15 per cent off the current advertised rates) whether for sale or for rent. Many sellers are taking steps during this slowdown in pricing to cash in on their current investment after making good gains, and upgrading to a higher tier of property where capital appreciation has greater potential, the report said.

MPS has seen specific interest in apartments between Dh600,000 ($163,310) and Dh1.5 million and then between Dh3.5 million and Dh5 million, in the villa communities.

A shift to the suburbs of Dubai, has resulted in more availability in the main stretch of Dubai (from World Trade Centre to Dubai Marina and adjacent communities), thus prices have also softened in these areas and strengthened in less established communities such as Dubailand, Sports City and Jumeirah Village, where demand has been created, the MPS report said.

These less established communities have allowed for more affordable properties to become more attractive, by offering more living space per sq ft with limitation mainly being longer commutes (5 km to 10 km) to the heart of Dubai.

The overall market movements in Q2 are healthy for the market as they create a pricing equilibrium across the Dubai region, according to MPS.

The movement will benefit less established areas, but as prices soften on the main stretch, there will be a partial shift back to this area leaving both established and non-established communities with a healthier supply and at healthier prices, the report said, adding that this helps stability and will contribute to a more sustainable and even more attractive market in Dubai with a more consistent growth being recognised in Q3 and thereafter.

While these factors are noteworthy in gauging the current market performance, there are some simple steps that investors and end users should consider in order to maximize their earnings.

According to the report, those looking to sell should consider this as the right time to open negotiations; however, this is as an option if one has alternative investment opportunities that one can benefit from by cashing in today.

With the average ROI on a property in Dubai approximately 3.5 per cent today (previously achieved average of 5.5 per cent), Dubai real estate remains a greater offer of return than most savings accounts and real estate markets in other countries.

Landlords wishing to rent should also consider opening negotiations, according to MPS.

Cost incurred whilst owning a vacant unit escalate due to loss of rent and payment of service/management fees. Maintaining properties whilst vacant will also result in additional utilities charges in order to avoid any damage to the property caused by heat and humidity during the summer peak season. Accumulated losses on a monthly basis can compensate any considerations of a higher rent demand.

Overall, buyers, investors and tenants should familiarise themselves with the market prior to making an investment, MPS highlighted in the report.

An individual valuation of investment should take into consideration location, upcoming developments, pre and post 2008 prices (allowing one to ascertain potential peaks) and ROIs.

In case of a tenant wishing to purchase, fear of any losses should be voided by factoring rent paid vs. potential slowdown in market at time of selling, the report said.

Those wishing to rent need to compromise where necessary whether related to location or preferred choice of building. Commuting in Dubai is convenient regardless of location.

The city's infrastructure provides access to Sheikh Mohammed Bin Zayed Road, Sheikh Zayed Road and Al Khail Road, allowing most locations in or around Dubai to benefit from short commutes. Whilst compromising may be considered as an undesired preference, the current relocation / shift in the property market will result in short term savings and long term opportunities, according to MPS. – TradeArabia News Service

Tags: Dubai | home buyers | Real estate prices |

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