Earlier this month, a senior official at Dubai government-owned property developer Nakheel said demand for luxury homes in the emirate had remained strong, as prices became more affordable and supply slowed.
“What I noticed last year was the supply in luxury had reduced and the supply in the lower budget housing had increased,” Aqil Kazim, Nakheel’s chief commercial officer, said in a television interview with Bloomberg.
“Today we have a strong demand on luxury because of that limited supply in luxury that happened last year. This has been a blessing in disguise as it has made property very affordable for new customers.”
Arabian Business asked a number of Dubai real estate experts if they were also seeing an upsurge in demand for luxury and any other major trends in the local market.
Helen Tatham, associate director of prime residential at Savills, said Dubai is currently one of the most affordable locations for wealthy individuals looking to buy luxury property.
“According to Savills World Cities Prime Residential Index, Dubai’s high-end prices have declined by 3.8 percent in the last 12 months. This makes Dubai the third most affordable major global city for purchasing prime real estate, at around $600 PSF [per square foot] and, with clear tax benefits and quality of lifestyle, it is increasingly attractive as a location of choice,” she said.
With prices more affordable, Dubai estate agency Allsopp & Allsopp have also seen an uptick in the number of buyers looking to enter the luxury segment.
“Allsopp & Allsopp have seen an increase in what we would consider to be a luxury buyer, those with a budget above AED5 million, by 23 percent in H1 2019 compared to H1 2018. It could be argued that this increase is due to decline in pricing and buyers taking the opportunity to move into a luxury property whilst it is within their reach,” said Lewis Allsopp, CEO of Allsopp & Allsopp.
Popular villa areas
Villa sales usually make up the bulk of luxury sales. According to real estate portal Property Finder, villa prices in Dubai have dropped 4.3 percent to an advertised median price of AED 855 per square foot compared to H2 2018. They are 12.1 percent cheaper than they were in 2017.
Areas that have proved popular for villas include those on the more affordable end. The most popular villa community was Dubai South, with 434 sales off-plan sales. Other popular areas for villas and townhouses were Town Square, Arabian Ranches 2 and Dubai Hills Estate.
However, the portal found that villa communities that experienced the biggest decline in sales prices in the first six months of this year were Damac Hills (down 8.2 percent), Emirates Hills (down 6.6 percent), Green Community Motor City (down 5.4 percent), Dubai Silicon Oasis (down 5.2 percent), Al Furjan and The Villa (down 5.1 percent).
“As new affordable villa communities are getting completed and handed over, we have seen a migration to these communities from popular areas such as Dubai Marina. Families are choosing to live a little further out in the suburban areas of Dubai in order to gain access to a larger property with outside space. We have also seen a large influx of renters converting to home buyers, especially in these new villa communities,” said Lynnette Abad, director of data and research at Property Finder.
The segment of the luxury market that has suffered is the expensive, older communities, such as some of those in Palm Jumeirah or Emirates Living.
“We are starting to see the availability of property in the secondary market dry up as those with no pressing need to sell hold on to their assets to ride out the current price cycle,” Richard Waind, managing director at real estate agency Better Homes, was quoted as saying in a recent report with regards to the high end luxury segment.
The issue when it comes to those aspiring to the luxury segment is raising funds, and this is the major challenge according to Allsopp & Allsopp.
“Prices of property is down, and there is a lot of conjecture as to why this is. My personal opinion is this is due to affordability issues. There is positive sentiment to buy, but there is just no easy way to get on the property ladder due to the high loan to value,” Lewis Allsopp said.
“Buyers need around 33 percent of the property value in order to purchase. Allsopp & Allsopp conducted a survey amongst tenants across the city and asked 100 people if they would buy if they could get a 95 percent loan. 77 people out of 100 said they would – the sentiment is there, unfortunately the ability is not,” he added.