But despite the resurgence, prices remain around 30% below their 2008 peak, the Dubai Residential Review from international property firm Knight Frank shows.
But prices are heading steadily upwards. On an annual basis, prices for luxury villas and prime apartments were 21.4% higher in the second quarter of 2013 and as prices have recovered, the volume of sales in the market has also started to increase.
The primary reason for the strong growth seen in Dubai’s prime residential property has been the desire for investors to place their wealth in what they perceive to be a safe haven market, says Knight Frank. In particular, property buyers from North Africa, the Middle East and Asia have pursued this strategy.
Data from the Dubai Land Department shows that, in 2012, Indians were the most active buyers of residential property in Dubai followed by Pakistanis, accounting for 19% and 15% of activity respectively. The British at 14% and Arabs at 11% were the next most important investors in the emirate.
While international buyers are a key feature of the market in Dubai, data contained within the index also shows that Gulf Corporation Council (GCC) nationals spent, on average, a significantly larger sum on residential properties in 2012 than any other nationals outside of the United Arab Emirates.
Despite prime property prices remaining below previous peak levels, concerns have been raised over the rate at which prices have recently been growing. As a result, the UAE Central Bank proposed a new mortgage cap towards the end of last year. The caps proposed were 50% on first homes and 40% on second loans for non UAE Nationals and 70% and 60% respectively for UAE Nationals.
‘While we believe that this cap would not affect the large portion of the market made up by cash buyers, it was seen as a positive move by the industry given that it’s likely to inspire more thought from those planning their exit strategy,’ the report says.
It adds that any directives are not expected to be fully implemented until later in the year and until then, banks are continuing to lend according to their own criteria.
In the rental market, an expanding expatriate population has pushed prime rents higher. In the year to June 2013, rents in the emirate increased by 15%. Recognising the increase in demand, investors are seeking out good rental investments where typically they can expect 4% to 6% net yields, says Knight Frank.
Rental rises have been noticeable in areas that appeal to young professionals and where there is good access to facilities such as Dubai Marina, Downtown Dubai and Palm Jumeirah, the report points out.
But it adds that government imposed restrictions on landlords raising the rents of their existing tenants has controlled this more than might have been the case otherwise and possibly...
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