Sunday, June 22, 2008

High demand for villas in Dubai, leads to 78% surge in prices

The scarcity of villas in Dubai, has resulted in increased demand for villas, reports Collier International UAE.

According to the House Price Index (HPI) of Colliers International, the demand for villas have continued to remain high as against the demand for apartments and townhouses, and this has resulted in surge in prices of villas by 78%.

The CEO of Colliers International UAE, John Davis, says "Demand for villas have remained particularly high, given the relative scarcity of villas as against in the case of apartments. More dwellings are currently under construction, likely to be delivered by end of 2008 and in 2009. The villas constitute 21 percent of total mortgaged properties used to collate the index."

The quarterly overall villa index had increased throughout 2007 till the first quarter of 2008, with an 85 percent increase during the period, it has been reported. The average rate per square foot for villas in Dubai during the first quarter has been Dh.1338.

The growth of townhouses during the period was far slower than the apartments and villas. The annual index saw an increase by 29 percent, while apartments saw an increase by 82 percent. Townhouses constitute 15 percent of the total mortgaged properties.

Dubai saw an increase in the number of completed apartments being delivered into the market during first quarter of 2008, particularly in Dubai Marina, Downtown Burj Dubai and The Palm Jumeirah. This additional supply input available for purchase saw a positive affect on the average rate per square foot for apartments, increasing it to Dh.1841 during the first quarter.

The HPI index report includes details on built-up area of these properties and total value of transactions per month. Depending on coverage of thirteen developments in Dubai, the weighting has been given on the basis of unit type - apartments, villas and townhouses at the rate of 55 percent, 34 percent and 11 percent respectively.

The index reveals that property prices in foreign ownership zones continue to increase - driven by strong demand for properties from end-users. The reason behind the increased demand for these properties are due to factors such as the high growth in UAE economy, particularly in Dubai, with high growth rate being achieved at the rate of 11 percent per annum, and due to numerous profitable finance options being offered to residents and non-residents.

"The index report is across expatriate free zone, and the numbers are likely to grow. It is an on-going process over a period of time," Davis said.

As per the index, the high residential rates in Dubai, currently averaging at Dh.950 per square foot is getting more attractive and cost-effective for end-users. Further, the decline in value of dollar-pegged dirham, as against other global currencies has enhanced the attractiveness of the property in Dubai, particularly for expatriates.

Further surging construction costs are also causing an increase in sales price of newly launched developments in Dubai, with costs expected to rise by 18 to 20 percent towards end of the year, states the report.

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