Friday, September 25, 2009

Dubai developers to get realistic and focus on affordable segments

Signs of internal migration are likely to appear in Dubai, with several affordable properties on the offer and a more realistic approach adopted by developers.

The property prices in Dubai have already undergone correction by about 50 percent, ever-since the peak transactions witnessed in 2008.

The Executive Director of Dubai Property Society (DPS), Adel Lootah, when speaking to the media, mentioned that there would be an internal migration of people within Dubai, to better-located and more affordable localities in future.

Transactional activities at the moment are more focused on completion of prime properties, either due to the location or a good developer.

The latest report by EFG-Hermes showed that property consolidation, which offers investors the option to transfer deposits from an early-stage project to an almost complete one, is also in the happening.

With the Cityscape Dubai, due to be held next month, the message to developers in future is to be more realistic and build mid-income properties.

The DPS Chairman, Ahmad Thani Al Matroushi, mentioned that with the drop in prices, people would begin moving from Sharjah and Abu Dhabi, to places like new Dubai, as it is only half-an-hour away from Abu Dhabi, and this will generate more demand and take care of the excess supply in the market.

The average price of Dubai Villa in January was about Dh.1600 per square foot, and that of apartments were about Dh.2100 per square foot, but by August, they had dropped to Dh.1250 and Dh.1650 respectively.

Developers will take a cue from this, and will focus more on affordable properties. When the city gets expensive, it creates lot of issues. Now Dubai will seem more attractive, as people can live in a nice place with an affordable rent, he adds.

Affordable housing should also be made applicable to tenants, as there have been positive signs in Dubai's rental market, including lowering of rents, and moving away from the unrealistic single-cheque payment.

With the Cityscape just two weeks away, it is often considered as a litmus test to gauge the state of property market. This year, particularly, may be true, as it is unlikely to be the hub of sales activity that it was. No region has been immune to the worldwide recession, and therefore, a strong element of realism has entered the real estate investment landscape, says Chris Speller, Cityscape Group Director.

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