Sunday, January 30, 2011

Abu Dhabi hopes to bridge gap with Dubai with new Reem Island units

Several high-rises in Abu Dhabi Reem Island are due for completion this year, and these could offer the much required breathing space to the under-supplied property market in Abu Dhabi.

These apartments, apart from being of superior quality, they are likely to be available for rental at a much lower rate than elsewhere in the city. If all works well, this could be the tipping point that the residential market of Abu Dhabi requires to bridge its gap with Dubai, where the rentals are far lower.

At present, the difference in rentals between Abu Dhabi and Dubai are nearly 20percent for apartments, in almost similar locations. This is, despite the fact, that rentals in Abu Dhabi fell by 16 to 30 percent in 2010, based on the location.

The wide rental gap is one of the main reasons that the professionals working in Abu Dhabi are making homes in Dubai. Dubai Marina has witnessed majority of such outflow, followed by the Greens Community. Further, the opening of the new Sheikh Zayed Bridge has reduced the commutation time, proving to be another temptation for professionals to choose Dubai as their home.

But, the real estate market, and the retail, health care and education sectors in Abu Dhabi cannot keep losing their residents to neighbours, particularly so, with the fresh series of recruitments being made by Abu Dhabi-based companies in financial services, and other industries, says media reports.

This is another reason for pinning hope on the new apartments at Reem Island. As these developments are likely to be the newest in the market, landlords will be keen to draw tenants. The rentals could be 10 to 25 percent lower than the average in the main island, said Simon Gray, Regional Head, Chesterton International.

According to report by Cluttons, the handover of several more units at Marina Square in Reem Island is yet to happen, but, once these units become tangible assets, a spell of increased activity is expected this year.

Apart from Reem Island, projects are nearing completion at the Corniche and Airport Road, with Etihad Tower and Landmark Tower due for release in second quarter of this year, and these developments will add 1200 new residential units to the market, said the Cluttons report.

It is evident that Abu Dhabi residents are adopting a ‘wait-and-watch’ approach on rental situation. It is hoped that by mid-year, they will see some apparent trends, based on which they could arrive at a decision.

Monday, January 24, 2011

Prices of Dubai housing units unlikely to recover before 2012

The residential market in Dubai will continue to witness an oversupply situation with prices unlikely to recover before 2012, says a report by Jones Lang LaSalle (JLL), the leading global real estate consultants.

The global real estate consultants, in their fourth quarter report, said that despite the recent stabilization in Dubai's higher-end residential sector, lending will continue to be a major factor in market recovery.
Improved lending may be seen in 2011 within residential sector, with banks injecting more liquidity into mortgage market, the JLL report said.

A total of 7800 units were completed last year, with total residential stock touching 309,301 towards the year-end. Another 25,500 units are likely to be completed in 2011. The apartments will constitute 79 percent of total residential stock by end of 2011.

Work on some major residential projects have once again begun, and are due for completion during first half of 2012. Although some delays in construction are likely, no major cancellations are likely to happen for projects targeted for completion this year. Moreover, Nakheel’s projects in Dubai Waterfront, Jumeirah Park, Jumeirah Village and Jumeirah Heights are due to begin in 2011.

According to the RERA (Real Estate Regulatory Agency) CEO, Marwan bin Ghalita, more than 202 projects have been cancelled last year.

The JLL report points out that the rents for apartments fell 8percent year-on-year, while villas dropped 11 percent year-on-year. The total value of residential transactions dropped 65percent in 2010, in comparison to that of 2009.

As for the office sector, the current oversupply situation is likely to continue with vacancy rates expected to grow through the year, putting downward pressure on rents.

Friday, January 21, 2011

Old areas in Dubai still high in demand

Although the rentals in newer localities of Dubai recorded decline over the past 18 months, the older parts of the emirate continue to be popular, it has been reported.

Localities such as Karama, Bur Dubai and Deira are still in huge demand and are the preferred locations for many. High accessibility levels, coupled with choice of all basic amenities such as grocery stores and eating-out joints all within vicinity, and reasonable cost of living in older areas, are the main factors for residents to opt for older localities in Dubai, a leading expert said.

The CEO of Landmark Properties, Charles Neil, who spoke to Emirates 24/7, mentioned that accessibility and lower day-to-day living costs are among the major factors behind high demand for older areas of the city.

The residents are accustomed to their well-established social circles in 'Old Dubai' and they are well-served for their shopping needs and restaurants, as once they move out, they may not enjoy the same level of accessibility, he said, while also pointing out to the fact that although rents in New Dubai may be cheaper, the quality of accommodation is far superior and the day-to-day living is also much higher.

However, this does not indicate that easing of rentals has not made its impact in the market. Several residents have moved from old to new Dubai recently, due to better affordability of leases.

Neil agrees that given the current market prices, and demand for new, better quality buildings, the demand for housing is much stronger in New Dubai, with few tenants of the Old Dubai, having moved to ‘New Dubai’.
But, Old Dubai is still quite popular, with people preferring to live in the same area where they world, and have the cultural community around them.

The Manager-Residential Sales & Leasing, Better Homes, Laura Adams, also acknowledged that the old Bur Dubai area continues to draw high demand.

Wednesday, January 19, 2011

Low, medium quality housing units record price declines

The selling prices of medium and low-quality residential units in Dubai will decline further during the first quarter this year, owing to surge in demand for high-end properties, said a report by Landmark Advisory, leading real estate consultancy in Dubai.

The January Dubai sales guide by Landmark Advisory states that it has identified a considerable price bifurcation on the basis of quality, particularly in the apartment segment.

Although the present trend seems to boost Dubai real estate market, the relative stability is seen only for chosen assets, the report pointed out.

As per the report, the sale-change patterns during the fourth quarter of 2010 were different when it came to apartments and villas.

The selling prices of villas depended on location, with significant declines being noticed in Central Dubai, where the prices for The Springs and The Meadows fell by more than 12 percent, said Jesse Downs, Director-Research and Advisory Services, Landmark Advisory.

However, in other areas of Dubai, such as units in Victory Heights, the four and five bedroom units actually increased in price owing to less supply in the market, she said.

Majority of the price declines occurred in Q3, while Q4 of 2010 was considerably stable, Downs said.

Generally, there is oversupply in the Dubai Market, and with significant new stock likely to enter the market shortly, there will be an adverse effect on selling prices, Downs pointed out.

Taking into account the findings since August 2010, the poor quality units were the worst performing assets in the emirate. Although the better quality units too, have been affected by price declines, it is not to the same extent. For instance, the lower quality units in the Dubai Marina during Q4 2010 dropped by nearly 10percent while higher quality units in the same area saw little or no decline, Downs explains.

The report said that apartment prices dropped more consistently across Dubai, with quality being the defining factor. Moreover, there are more apartments than villas that are likely to hit the market in the short-term, which would further add to current oversupply and continuing to bring prices down, Downs said.

As for commercial sector, the report said that the demand was more for renting rather than for sales.

According to Landmark report, significant price declines were noticed in Jumeirah Lake Towers (JLT), owing to new supplies there. While standard quality office space fell up to 30 percent in some cases, good quality spaces saw a decline of 15 percent, the report said.

The prices are likely to continue to fall for a while, but, the comparative shallow declines seen in the last quarter, actually indicate signs of boost for the real estate market in Dubai, Downs concluded.

Tuesday, January 18, 2011

New decree in Dubai maintains rent cap

According to a new decree issued by the Ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, the rents of properties in the emirates can be raised only if the rates are below 25 percent of average index price set by RERA (Real Estate Regulatory Agency).

For instance, if the rent was 26% to 35% less than average rent for similar property, the maximum increase is limited to 5percent of total rent, while in cases where the rent is 36% to 45% less than average rent for similar property, maximum rise will be 10percent of rent value. Instead, if the rent was 46% to 55% less than average rent for similar property, the maximum rise will be equivalent to 15percent of rent value, and for rents less than 56% to 65% less than average rent for similar property, it could be 20% of total rent being the maximum increase, the Decree No.2/Year 2011 stipulates.

The decree, effective 10th January 2011, endorses RERA's rent index as the main reference to determine the average rent in the emirate.

However, despite the fact that RERA rental index is based on actual rental transactions in Dubai, several landlords and agents are yet to register contracts on Ejari, the e-registration portal system, an industry expert said.

The RERA website still carries a notice urging landlords and property leasing and management firms to register rental contracts on Ejari, or face penalties. In cases of violations, RERA imposes penalties of up to Dh.50,000, apart from the fact that tenants will not receive DEWA, due or etisalat connections.

Monday, January 17, 2011

Dubai Airport Freezone to launch new Business Enabled Offices

The Dubai Airport Freezone has announced the launch of its new Business Enabled Offices (BEO) initiative, aimed to offer seamless service and improve investor experience.

The leading new consumer offers investors a composite fast-track package that enables them to quickly establish their business in the freezone and enables in getting it off the ground at a quick pace.

The Dubai Airport Freezone aims to offer investors a trend-setting customer experience in starting new business, said Nasser Al Madani, Assistant Director General, Dubai Airport Freezone.

The Business Enabled Office Package will allow investors a streamlined method to set up and immediately operate their business in the freezone. This forms a part of core strategy by Dubai Airport, aimed to offer best possible business environment with improved levels of customer satisfaction, Al Madani said.

Saturday, January 15, 2011

Developer assets may be attached to escrow account for projects

Developer's assets can be attached to escrow account for projects, in case the project does not have sufficient funds to pay back an investor, in cases wherein the court has ordered a refund, a legal expert said.

Explaining the issue, Scott Hutton, Senior Counsel, Real Estate & Construction Department, Habib Al Mulla & Company, said that the problem arises when the developer is a special purpose vehicle (LLC) set up for the sole purpose of completing the project. In such cases, there may be no other assets in the developer company, and the investor cannot recoup their losses.

The Dubai Land Department (DLD) mentioned that only companies formally registered as offshore entities with Jebel Ali Free Zone Authority (JAFZA) will be eligible to register properties from 1st January 2011. The initiative aims to track any change in ownerships, which are otherwise never reported to DLD.

According to Hutton, more claims were filed in 2010, as until then investors were hesitant to file cases hoping for market improvement or a new regulation to be introduced to solve their issues.

However, law experts are of the opinion that some developers may use legal loopholes to escape payment.
The Property Court, an arm of Dubai's First Instance Court, was established in August 2008. Depending on the case in question, it takes atleast a year for a judgment. The DLD has established a mediation committee to help resolve developer-investor conflicts, if the parties seek an out-of-court settlement.

Monday, January 10, 2011

Affordable quality units makes Dubai realty sector more attractive

The real estate report for the Dubai market for Q4 2010 by Cluttons, the London-based property broker, revealed that the investors seem more confident about the Dubai real estate market now, particularly in certain locations. Moreover, with the re-emergence of major lenders such as Tamweel, one of the largest Islamic mortgage lenders, who have been offering attractive rates to credit-worthy clients seeking to purchase quality stock, investors are showing increased confidence.

However, the Cluttons reported that the residential sector in Dubai recorded a fall in prices by 5.1% during fourth quarter of 2010, in comparison to that of previous three months. The prices of villa dropped 5.1percent, while those of apartments dropped 2.4percent in the fourth quarter, in comparison to that of third quarter.

According to Cluttons, about 35,000 new homes will be ready in Dubai within next two years. But, with increased supply, drop in values will be inevitable. But there is increased demand for quality homes, as sales and rental markets in good locations are getting more affordable.

The lifestyle projects, including the Old Town, Palm Jumeirah, Dubai Marina, The Meadows, and The Greens are continuing to be more resilient in both sales and leasing market. With the buyers now being able to afford quality homes in better locations, the reputation of Dubai real estate market is growing, according to Cluttons report.

As for the commercial sector, with the current construction and completion of commercial projects within Jumeirah Lake Towers (JLT), Business Bay, Tecom, Business Bay and Silicon Oasis, there is a downward pressure on rents in most areas of the city. Localities such as Deira, Bur Dubai and Sheikh Zayed Road are maintaining healthier levels.

Pointing out to the migration of multinationalss such as Merck Serono, the Swiss pharmaceutical giant, Cluttons says that this is an encouraging trend as Dubai's affordability has begun to make an impact.

However, the decline in office rents will continue as long as fresh supplies keep flowing into the market. The commercial rents dropped 9% on an average over the past quarter, with Tecom and DIFC being the only exceptions, the report said.

Saturday, January 08, 2011

Abu Dhabi tenants re-locate in search of quality affordable units

The tenants in Abu Dhabi are re-locating in search of quality and affordable apartments, with leasing rate dropping by 7percent and villas by 5percent, said a fourth quarter report published by the leading property management company, Asteco.

With increased supply, the cost of rentals in the capital have continued to fall for the past three months in 2010, dropping at an average rate of 7percent for apartments, while on-island properties fell by 6percent.
Several factors have contributed to this condition, including the price-driven demand, lack of company housing allowances and landlords getting flexible with rates.

A double bedroom apartment in Al Raha Beach is now rented for Dh.120,000 to Dh.190,000 annually.

The CEO of Asteco Property Management, Elaine Jones, mentioned that several new opportunities will arise in 2011. The tenants and buyers will have wide range of choices shortly, as the first phases at Reem Island come on stream, with the new supply at Al Raha Beach.