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Dubai ranks top in capital value surge

During first six months of 2021, Dubai has been on the top the list of global prominent cities to record a positive capital value growth for its luxury properties. It’s been noted the fastest growth rate since 2016 as the world’s residential property markets remains unchanged.

Analysts explain the increase of capital values are resulting from work-from-home boom and the consequent effect on need of live-and-work spaces. Other cities that are experiencing similar situations are namely Moscow, Cape Town and Lisbon. Regardless of the change in the businesses, during lockdown, the number of transactions were still higher than the same period of the last year, 2020.

Dubai’s proactive policy measures and effective handling in pandemic to reboot the economy played a crucial role in driving plea of high end residentials, says World Cities Index report. In the index, over the past six months capital values in prime housings surged by 3.9 per cent across 30 cities around the globe.

Due to changes in taxes and policies and tremendous uncertainty in the global economy, the average growth of capital values across the nations were barely reached 0.7 per cent from mid 2018 to end of 2020.  

The report further emphasized “The pandemic, which exacerbated the severity of the slow growth, caused many properties to completely shut down during lockdown in many cities.”

Over seventy per cent of the worldwide had positive capital value growth for the first half of the year. Not all cities performed equally over the past six months.

The global cities which posted negative capital value growth are cohesive in their historical reliance on international buyers in their prime markets, a segment that has been severely limited by travel restrictions.

Chinese mega cities Shanghai and Guangzhou have reportedly had capital value growth of 13.7 per cent and 7.9 per cent respectively within past six-months growth figures. Price rises in China have accelerated in 2021 despite tightening of financing and local policy changes in an attempt to cool the markets. “Lending-fuelled purchases have been driving Chinese property price growth in recent years, with buyers believing property is likely to remain the safest investment in China,” said the report.

While nearly 70 per cent of the locations affected by Covid-19 experienced positive capital value growth in the past six months, cities with a long history of relying on international buyers in their prime markets saw negative capital value growth as a result of travel restrictions, said Savills report.

Swapnil Pillai, Associate director of research at Savills Middle East, said the return of international travel is likely to provide an increased supply of buyers for prime properties. “Furthermore, the economic recovery and growth led by increasing vaccination rate in the UAE is expected to further support buyer confidence and boost demand. Though a degree of pandemic-related uncertainty remains, the prime residential sector is likely to remain strong through the rest of the year.”

The report noted that the availability of good quality stock, low lending rates and relatively affordable real estate prices led to strong transaction activity which drove capital values higher across prime properties Return of international travel to world cities will likely provide an increase in the supply of buyers for prime properties

In the US, Los Angeles and Miami lead with growth above 9.0 per cent in the first half of 2021.

The most expensive location in the index, Hong Kong, had seen declines in prices from 2019 through the first half of 2020 as a result of uncertainty in the region. However, capital values increased 1.9 per cent in the year to June 2021.

In London, following six years of falls, values remained flat in 2020 then recorded an increase of 1.1 per cent in the first six months of 2021 as the city looks good value.

Some cities have seen price changes go from negative to positive territory in the first half of 2021. Singapore, Bangkok, and Kuala Lumpur benefitted from increased demand for decreased supply.

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Dubai’s mortgage deals increased by 90%

According to data from Dubai Land Department (DLD), mortgage transactions recorded a growth of 44 percent in the first half of 2021 as compared with the same period last year. The total number of transactions in H1 2019 was 12,520 units, while in H1 2021 it was 19,920 — recording an increase of 91 percent. This ratio was only 21 percent in H1 2019.

The same report revealed that the value of Dubai mortgages rose by 38 percent from 76 billion dirhams in H1 2019 to 106 billion dirhams in H1 2021 — an increase of 29.2 billion dirhams. (8 billion USD).

According to Vaughan, the current slowdown in the UAE economy has yet to affect home prices or growth. “Over the past few years, we have seen a trend of high levels of confidence from borrowers with strong household finances and employment to support their mortgage repayments. The Dubai housing market is growing due to factors such as increased demand for units.

Vaughan attributed the increase in activity in the market, in part, to the major reform in lending policy introduced by the Central bank of the UAE in early 2020, which allowed banks to lend 5.0 percent more, reducing the down payment requirement for first-time buyers from 25 percent to 20 percent. “This change has made getting a mortgage more accessible for some people.” He added.

(1) “The ratio of Dubai’s housing mortgage commitments to its overall credit exceeded 85 percent this year, up from 74.5 percent in 2010 and 69.9 percent in 2011, based on data compiled by Bloomberg. The city accounted for about 9 percent of the emirate.

(2) “This will allow more freedom to buy the most suitable property at a price that fits their budget,” said Daniel Stanzler, senior sales executive at Arabian Homes.

(3) More than Dh 28 billion was pledged to Dubai developers this year through the first quarter of 2021, according to data from Real

According to the Dubai Land Department (DLD), the value of mortgages recorded in the emirate reached 20.9 billion in January 2021, the highest since October 2016. Total sales for the month also hit Dh29.4 billion, the highest since January 2018..

(4) A Dh7bn residential project in Dubailand will be launched next week, a developer has announced. The French Village, a 635-unit community offering serviced and bonded units as well as apartments, is being developed by Dubai-based GIC Real Estate. It is expected to include a variety of shops and restaurants.

The data highlighted that the property market in Dubai remains resilient and continues to generate investor interest despite the coronavirus pandemic.

The last few months of 2020, however, had seen more buyers taking advantage of the low prices, prompting analysts to predict that the market is stabilizing.

Half-half split mortgage transactions have been reported in Mortgage Finder for apartments and townhouses/villas, with townhouse/villa slice delivering slightly more at 55 percent. Also, Data Finder reveals that this year’s first half was reported 27.5 percent, and apartments were accounted 72.5 percent.

The research from Data Finder, coupled with our knowledge on the 50/50 split in completed mortgages for the same segments, suggests that more apartments are being purchased with cash than villa/townhouses. This makes sense given that villa/townhouses tend to be more expensive and the prices of those in prime areas of Dubai have seen notable increases of late. Furthermore, cash buyers often tend to be investors and apartments are generally more favorable for investment purposes,” Vaughan said.

Banks have continued to offer competitive mortgage products and terms, with interest rates remaining at record lows. It is possible to find mortgage rates available now from just 1.99 percent, compared to 2.49 percent in the middle of 2020.

“Banks in the UAE are open for business. Many are currently offering great headline mortgage rates to entice borrowers, with some going further and being more flexible in their lending criteria depending on the borrower profile. This is great news for potential buyers, but it also means they need to ensure they do their research and understand the full terms of the mortgage before signing on the dotted line. In essence, it’s more important now for borrowers to shop around and see past just the headline rate to look at the mortgage product as a whole and make sure they are getting the right deal,” said Vaughan.

Notable apartment completions were Bellevue Towers (360 units), Amna Tower Al Habtoor City (450 units), Bloom Towers JVC (946 units), and UNA Apartments (956 units). For villas, Janusia, Albizia, Sycamore, and Aster in Akoya Oxygen (1,644 units), Jumeirah Luxury in Jumeirah Golf Estates (290 units), and Villanova Amaranta 2 (352 units).

Approximately 26,318 apartments are under construction with the majority located in Downtown Dubai (15 percent), Dubailand (12 percent), and Mohammed Bin Rashid (MBR) City (16 percent). Over 80 per cent of the 7,800 newly built villas are going to be in MBR City and Dubai Land.

Key off-plan projects announced during Q2 included Sobha Waves at The Waterfront District (592 units), Palace Beach Residence Emaar Beachfront (541 units), Murooj Al Furjan (418 units), and Bliss Townhouses (335 units) at Arabian Ranches 3.

On a quarterly basis, residential asking rents were up 6.5 percent, the first substantial gain since 2014.

Compared to the same period last year, listed rents were down 7.8 percent for apartments but jumped 15.2 percent for villas, the highest record increase since our base year.

Average annual rents for 2-bed villas stood at AED105k, 3 bedroom units at AED151k, and 4-bedroom villas coming at AED 215k. Average rents per year for studio apartments were AED34k, 1-bed at AED51k, 2-beds at AED74k, and 3-bedroom apartments were AED113k. Residential occupancy in Dubai was estimated at 83 percent this quarter.