15 November 2014

Dubai: Amidst a Slowdown, Underlying Strength

Even though transactional activity has fallen by 50% this year, an analysis reveals that brunt of the decline has been in cash transactions, indicating a systematic decline in speculative activity. However, the opposite trend-line is seen in mortgage transactions across both segments, as we hypothesize that end user purchases continue to increase, reaffirming the house hypothesis. This increase in mortgage activity is led by two-bedrooms in the apartments segment; whereas it is dominated by the four and five-bedrooms in villas, giving further credence to the claim as being the strongest indicator of a maturing real estate market.


        
A closer look into the data reveals a crossover between transactions of four-bedroom apartments to four-bedroom villas when it comes to home-ownership. Mortgage transactions in four-bedroom apartments have registered virtually no growth over the last 8 years, while four-plus-bedroom villa mortgages have continued to rise steadily.

A city-wide and unit-wise price comparison shows that five-bedrooms have consistently outperformed the market in the last 8 years within the villa segment. Smaller sizes continue to attract investor activity in the apartment space; however, there appears to be a clear shift towards the two-plus-bedroom spaces. We opine that this trend will continue to grow as end users increasingly dominate the market going forward.

A rental comparison of RERA Index of the third quarter (2010-to-date) shows that the largest percentage increase is in the four and five-bedrooms compared to the smaller size units. This increase implies that the larger units will incur a higher number of mortgages while residents begin to buy their own homes as renting becomes uneconomical.

To read the full report click here: http://blog.reidin.com/PublicReports/Amidst_a_slowdown.pdf