New property units in Dubai are approximately 12.5 per cent smaller than older ones, despite prices going up substantially higher in the post-pandemic period. This has prompted many property buyers and investors to move to affordable and outskirts areas to lay hand on larger properties at lower rates, analysts said.
Zhann Jochinke, director of market intelligence and research for Cavendish Maxwell, said new apartment project launches differ drastically in quality and overall offering from some of the ageing existing projects.
“Interestingly, at the bedroom level, the highest price per square foot premiums are predominantly observed in 1-bedroom units. These units also exhibit the largest disparity in average unit square footage, with new units being approximately 12.5 per cent smaller than older ones. However, despite this reduction in size, sales prices only show a slight increase in comparison,” Jochinke said.
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According to Property Monitor analysts, off-plan price premiums exceeded 20 per cent, reaching as high as 80 per cent in Dubai Sports City and 70 per cent in International City.
Demand for bigger units increased substantially after the coronavirus pandemic as residents were restricted indoor due to the safety and precautionary measures taken by the authorities during the pandemic. But the unprecedented demand for Dubai property in the post-pandemic growth in the real estate market has pushed prices and rentals to record highs.
Moving to affordable, larger properties
The unprecedented demand for property has resulted in prices for plots also going up substantially, prompting some of the developers to reduce the sizes of the apartments to accommodate more units in their projects.
As sale prices soar in established Dubai communities, Espace Real Estate analysts said people are increasingly opting for more affordable areas where they can find similar or even larger properties at lower price points.
They continued that the hike in rental prices and more accessible mortgage products are pushing many residents toward home ownership.
In April 2024, property prices continued climbing to all-time highs and stood at Dh1,351 per sqft, which is 72.1 per cent higher than April 2009 and 9.5 per cent above the market peak of September 2014, according to Cavendish Maxwell’s Property Monitor report.
On a year-on-year basis, prices have increased by 20.1 per cent in April and now marks 38 straight months of year-on-year increases, while on a year-to-date basis, prices have increased by 5.23 per cent in April 2024 compared to 2.67 per cent in April 2023.
Divergence between ready and off-plan
Going forward, Zhann Jochinke anticipated that the divergence between ready and off-plan market segments will persist.
“From one side, the ready property market largely continues to plateau across the majority of property types and price points, save for the exception of the renovation effect in the single-family homes segment. This is particularly evident within the villa segment, where a number of properties were snapped up as the market began to recover and have since undergone complete renovations,” he said.
With regard to off-plan properties, he projected that the market is poised to maintain its dominant position for the foreseeable future, with project launches proceeding at a vigorous pace.
“Although recent off-plan launches have seen strong demand, ongoing monitoring of absorption rates is imperative. A slowdown in absorption could signal a potential oversupply issue, which may lead to a market slowdown,” he added.
Although Jochinke is optimistic about the outlook for the year ahead and foresee sustained growth, he alerted that it’s crucial for decision-makers across developers, investors, and occupiers to remain mindful of the lessons learned from previous market fluctuations.