Dubai's property market has been undoubtedly been falling lately, albeit the drop in values has been very mild compared to the notorious 2008 crash thanks to huge improvements to market safeguards in the intervening years. Now, experts report that the market may be bottoming out, and prime properties are outperforming the average to deliver yields that many investors are finding attractive.
The ValuStrat Price Index (VPI) report for May said that the month witnessed a “clear trend” towards a plateau in prices. Furthermore, some areas actually witnessed modest increases in prices over the course of May, and key locations also witnessed growth in transaction volumes. The index monitors 26 different areas across the emirate. The latest report said that the data recorded in May added to previous speculation that values in the areas it covers could be bottoming out.
The average property price for January 2014 is used as the base for the current index, representing a 100 point score. Against this benchmark, the VPI for residential prices in May registered at 98.0 points. This is down a comparatively modest 1% year-on-year, and does not represent any significant change from the previous eight months. This, the report says, provides fresh evidence to an idea that has been gaining currency lately; the expectation that prices in Dubai have more-or-less reached their lowest point in this part of the cycle and will remain essentially steady until they begin to rise again.
The VPI monitors prices of both villas and apartments, and the May report shows that apartments are doing particularly well. They registered at 98.8 points, and prices had managed to rise by 0.3% since January. Villas, by contrast, were recorded at a lower 96.7 points in May, which is a fall of 0.2% compared to January.
Even during the correction, Dubai did not entirely lose its appeal to property investors. With rents remaining relatively steady, yields actually strengthened and this persuaded some to invest while prices were falling. Over the course of 2015, investors from 150 different nations picked up new property investments in Dubai and spent a total of around Dh135 billion in doing so. Now, the market is not only showing signs of having bottomed out, but is actually performing fairly well at some levels.
Prime property in the emirate is decidedly outperforming the average, and as such apartments at the higher-quality end of the market are among the properties proving most popular with investors who are looking for point of entry into the emirate right now. Knight Frank reports that, in the first quarter of 2016, prices for prime properties in Dubai were up 2% on the previous quarter. As with the market as a whole, apartments outperformed villas, and Knight Frank expects this trend to continue.
As for the state of the emirate's property market, if it has not in fact fully bottomed out already, Knight Frank predicts that this will happen before the year is out. 2017, the consultancy forecasts, will see prices picking up again as Dubai enters a recovery.
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