Dubai’s market for luxury homes is softening as mortgage caps and higher transaction fees take effect, new data has shown.
Brokers say that overall price growth in the emirate’s property sector, which last year was among the fastest in the world, is slowing.
Average values across the emirate rose by 3 per cent in the second quarter while villa prices were nearly flat, according to Colliers International’s house price index.
Average prices across all home segments rose by more than 20 per cent last year.
The Colliers index, which is seen as being one of the most reliable in the emirate because it measures actual achieved prices for homes mortgaged through HSBC, Emirates NBD, Standard Chartered, Amlak Finance and Noor Bank, found that villa prices in Dubai fell fractionally to Dh15,866 per square metre in the second quarter from an average of Dh15,931 per sq metre in the first quarter.
And, as mortgage caps introduced last year by the UAE Central Bank continue to restrict the amount of money that people can spend on high value homes, prices could slow further.
“We are certainly seeing a softening in the market for villas over Dh5 million,” said Catherine Clarke, a director in residential valuations in Colliers’ Dubai office. “The mortgage cap has certainly hit those properties. You’re looking at a down payment of 35 per cent plus additional fees on transactions. I would anticipate a slight softening going into the future for this segment of the market. It’s too early to tell whether this means real price falls or not.”
Colliers, which works with historic information because it has to gather the information from the five banks supplying its data, said that at the other end of the market, apartment prices rose slightly in the second quarter compared with the first, increasing by 5 per cent to Dh17,050 per sq metre from Dh16,182 per sq metre.
“We’ve actually seen a move towards town houses and apartments for purchasing,” Ms Clarke added. “There has been a definite change in the types of properties changing hands with fewer villa sales compared with apartment sales.”
More recent data from rival broker DTZ appeared to confirm the trend.
It found that average achieved sales prices in Dubai increased by just 2 per cent in July and August to Dh16,050 per sq metre from Dh15,784 per sq metre at the end of June.
“At the end of 2013 we were seeing quarterly price increases of between 6 and 8 per cent,” said Simon Townsend, business development manager for the Middle East at DTZ. “Now I think were going to see average prices flat line for a little while.”
“That does however mask the fact that there has been no activity in the high end villa market over the past few months while the apartment market had made up for that,” Mr Townsend added. “Villas are suffering too because a lot of the locations have lost prestige as developers have built lower value properties around them.”
Earlier this week the consultancy Knight Frank reported that prices for prime villas in Dubai had risen by an average of 6.3 per cent over the year to the end of June, while mainstream house prices had gone up 24 per cent over the same period.
It said that the difference in performance could be put down to new mortgage caps, the fact that prices in many newer areas such as Dubai Sports City and Dubai Silicon Oasis have been rising from a much lower base and the fact that rent increases in the luxury segment had lagged those of more affordable homes.
lbarnard@thenational.ae
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