Prices surged by 2.48% month-on-month | August 2024

Summary

In a Dubai I 103.8 radio segment, Property Monitor CEO Zanja Heni discusses the rapid 2.48% month-on-month property price increase in Dubai, a second-highest record in the market's recovery cycle. Heni expresses concern over the unsustainable pace, noting it could lead to a bubble and price people out. New property launches, especially in areas like Motor City, are driving the index up. He anticipates high prices to continue but warns of a potential market slowdown due to oversupply.

Takeaways

• 📈 The Dubai property market is experiencing rapid price growth, with a recent monthly increase of 2.48%, nearly reaching 25% year-on-year.
• 🏙️ New property launches, especially in areas like Downtown and Business Bay, are driving up the average price per square foot, significantly impacting the overall market index.
• 🚀 The pace of price appreciation has doubled, which is concerning as it's unsustainable in the long term and could lead to a market bubble.
• 🏢 Historically, the Dubai government has intervened to cool down the market by implementing measures such as doubling transfer fees and adjusting loan-to-value ratios.
• 🌐 The current market recovery cycle has seen the second-highest month-on-month appreciation, indicating a potential overheating of the market.
• 🏡 The market is dominated by off-plan sales, accounting for over 70% of sales in the last month, which is a significant shift from previous cycles.
• 📉 There are concerns that if the rapid price growth continues, it could price out potential buyers and disrupt the market's balance.
• 🔍 The market's health is being closely monitored, with a focus on how quickly new projects are being absorbed by buyers as an indicator of future trends.
• 🏘️ Villas and townhouses in established communities are not seeing the same level of price growth as new launches, suggesting a分化 in the market.
• ⏳ Developers are closely watching sales velocity, with longer sales times for off-plan properties potentially signaling a market slowdown.

Q & A

What is the current trend in property prices in Dubai according to the latest report from Property Monitor?

The trend is one of significant appreciation, with a record increase of almost 2.48% month-on-month, which is the second highest month-on-month appreciation in the market recovery cycle.

What is the concern with the rapid pace of property price appreciation in Dubai?

The concern is that such rapid appreciation is not sustainable and could lead to a bubble, pricing more people out of the market, and misaligning returns on investment with rent levels.

What measures did the government take in the past to slow down the property market in Dubai?

In the past, the government doubled the transfer fee and made changes to loan-to-value (LTV) ratios to slow down the market and avoid a bubble.

How does the current market situation compare to the previous cycle?

The current market is in an appreciating phase that has been modest until recently, with off-plan sales now dominating the market. In contrast, the previous cycle saw consecutive high month-on-month price growth.

What is driving the current increase in property prices in Dubai?

The increase is driven by new property launches, particularly in areas like Motor City where recent launches have significantly higher prices per square foot than existing properties.

What is the role of off-plan sales in the current property market in Dubai?

Off-plan sales are currently dominating the market, accounting for over 70% of sales last month, and are a significant factor in driving up the overall property index.

Is the recent jump in property prices likely to be a temporary blip or part of a longer trend?

It is uncertain, but given the number of new launches in the last few months, it is expected that prices will remain high in the coming months, though they may not continue to rise at the current rapid pace.

How do property developers react when they start to see a slowdown in sales?

Developers may offer concessions, incentives, and higher commissions to brokers to stimulate sales when they notice a slowdown in the absorption rate of their projects.

What is the typical time frame for developers to sell out new property launches in Dubai?

For larger developers, it can take as little as a few days to a week to sell out 90% of a new project, while smaller developers may take up to six months or more.

What indicators might suggest an impending slowdown in the Dubai property market?

A slowdown could be indicated by a lengthening of the time it takes for developers to sell out their projects, a decrease in the percentage of properties sold at launch, or a reduction in the number of properties being launched.