Dubai’s freehold real-estate market is increasingly becomes a dominating force, with owner occupied home ownership now accounting for nearly one in six transactions, up by more than 100 per cent in the last four years, a report said.
The emirate’s expatriate community is increasingly converting from renters to owner-occupiers as indicated by a strong resurgence in mortgages, added the Home Ownership: Dubai’s Road to Prosperity 2013 report released by Unitas Consultancy, a Dubai based real estate consulting firm.
Sameer Lakhani, managing director, Unitas Consultancy, said: “The growth of end-users indicates the maturing of Dubai real estate market as comparable to other international cities. Regardless of price movement, the number of mortgages has exhibited a steadily rising pattern, indicating the shift from an investor dominated market to an end-user owner occupied society.”
“Critical to Dubai’s growth is the anticipated increase in its population. An increase in 6 percent per annum (putting Dubai’s growth in the top 0.5 per cent of all city growth in the world) leads to a population surpassing 3.25 million residents by 2020.
“This is what is expected to stimulate residential and commercial demand. We expect the trend of home ownership in Dubai to continue fuelled by the creation of new jobs. Dubai World Central and the Al Maktoum airport will be the magnet for more jobs and communities, and Dubai’s World Expo bid will act as a fillip to this,” he added.
An analysis of mortgages percentage of overall supply indicates a strong preference for Government Sponsored Developments (GSDs), thus indicating higher and more stable ownership rates of between 20 per cent to 28 per cent in areas like GSD Dubai Marina, Greens, Arabian Ranches, Springs and Meadows as opposed to private sector buildings in the Dubai Marina and Jumeirah Lakes Towers (JLT) which stands at 6.55 per cent and 11 per cent respectively.
Whilst villa communities have always been preferred by mid to high income end users, the report indicates that Greens condominium community complex has seen a high interest by owner occupiers, showing a shift towards apartments.
The study shows that end user demand is fairly inelastic to price movements, indicating an inclination to living in high quality communities outweighing price concerns.
“Arabian Ranches, for instance, has clearly outperformed Emirates Living. The price rise in the latter has been more sustainable and less dominated by ‘hot money’, leading to the conclusion that quality is preferred over location. This trend of quality developments in the Sheikh Mohammed bin Zayed Road corridor is expected to accelerate with the development of Dubai World Central and the Mohammad bin Rashid City,” said Lakhani.
Also of particular interest is that mortgage ownership in JLT is almost identical to private sector developments in Dubai Marina.
There is a clear growing preference for JLT indicating it is becoming the preferred destination for living for the middle and upper middle class segment. One, two and three bedroom apartments are clearly the preferred choice for investors as well as end users in the JLT community, lying to rest the hypothesis that studios were a liquid and attractive investment in this area.
This investment pattern reveals that the price rise is sustainable as families increasingly gravitate to this area and capitalise on the community’s status as a self-contained mixed-use locality.
The report also highlights the World Expo bid will act as a catalyst for growth, creating thousands of jobs, and stimulating growth as residents move to communities surrounding Sheikh Mohammed bin Zayed Road.
“We opine that this market will exhibit steady double-digit growth, accentuating and accelerating the trend of home ownership as Dubai’s population continues to grow at a CAGR of 6 per cent. Surrounding communities along Sheikh Mohammed bin Zayed Road such as Dubai Investment Park, Greens, Jumeirah Village, Arabian Ranches, The Villa, Arjan, Majan and Sports City will largely benefit from the influx of capital and people,” said Lakhani.
“Our outlook for 2013 is that Jumeirah Lakes Towers and Emirates Living are expected to outperform as end user ownership gathers pace. A migratory effect will take place to areas such as Jumeirah Village and Sports City as tier one markets start pricing out middle income families. Rental rates in these areas are expected to rise by 15-20 per cent this year,” concluded Lakhani.