The value of residential property transactions in Dubai is increasing but is still well below what it was this time last year, according to a report from consultants.
Total transaction values rose 50% during the second quarter of 2010 with the number of residential transactions up by 49% but this is still down 35% on a year earlier, according to the report from Jones Lang LaSalle.
The report also shows that apartment rents were down by 4% in the second quarter compared to the previous quarter and 10% lower than the second quarter of 2009 with the biggest decreases in the high end sector. Villa rents saw even bigger falls, down 23% year on year and 11% in the past three months.
Asking prices have fallen marginally since the first quarter while actual achieved prices increased by 1% to around AED867 per square foot. The report added that apartment prices had remained stabled whereas villa prices were up marginally over the last quarter.
However with the total residential stock in Dubai expected to hit 320,000 by the end of 2011, Jones Lang Lasalle said prices were not expected to recover fully before 2011 at the earliest.
‘Unlike the office sector, no major delays or cancellations are for seen in the residential market over the remainder of 2010,’ the report said, adding that about 14,000 units have been completed so far this year.
‘Finance is a key factor in market recovery. The residential market has shown signs of improved lending in 2010 as more banks are injecting liquidity into the mortgage market,’ the JLL report added.
Meanwhile a senior official at one of Saudi Arabia’s biggest banks has said that GCC countries need to take into account the effects that real estate booms have had on regional economies.
‘The time has come to recognize the broader economic importance of the real estate sector and to bring it under proper, comprehensive, formal regulation in a way that takes into account the mistakes made in the past,’ said Jarmo Kotilaine, chief economist at National Capital bank.
‘At one extreme is the Dubai market, the leader of the regional real estate boom and the main focus of speculative activity. Ultimately, improved price competitiveness should help Dubai but sustained recovery will take longer to materialize,’ he explained.
At the other end of the spectrum Saudi remains a fairly closed market faced with considerable excess demand in many market segments, he added.
‘The rapid emergence of the sector spawned a foam of speculative bubbles, which in some cases had far reaching consequences for the broader stability of regional economies. While correction in some markets may take years to work through, the current situation represents an important opportunity for the entire region,’ said Kotilaine.
