16 March 2015

Dubai: The Path of Symbiosis

This report dissects the structure and internal dynamics of Dubai Marina, as its importance for one of the hot spots in terms growing external investors (attributes 16% of total Dubai freehold transactions value in 2014). The supply dissection reveals that the community is skewed towards high net worth individuals as only 5% of the properties are below 1M AED.

An analysis between Emaar properties and Private Sector Developers’ (PSD’s) in Dubai Marina reveals that the former is a more liquid asset compared to the latter in a downturn. Moreover, a price index between both segments shows that Emaar properties have outperformed PSD’s by 26 points. On an historical average psf basis, Emaar properties trade at a premium of 185 AED/Sqf to PSD’s, or approximately 20% above the PSD index on a consistent basis.

A price analysis between JLT and Dubai Marina shows that JLT has outperformed PSD in Dubai Marina, but has underperformed Emaar properties. This outperformance has meant that JLT prices are virtually identical to the PSD in Dubai Marina, indicating that the less preferred location has been more than compensated by qualitative factors such as superior build quality and a better planned community. Given the superior rental yields at JLT, we opine that the price outperformance of JLT is expected to continue as Dubai continues its trajectory towards end users.

The current lull in the markets will likely continue to disproportionately weigh on PSD properties, as investors and end users alike will favor GSD properties in Dubai Marina. Given the “New Normal” outlook that is firmly in place in the real estate markets, JLT prices will continue to outperform in the medium terms as qualitative factors continue to dominate in the decision making criteria for the home purchases. 

Click to read/download the full report: http://blog.reidin.com/PublicReports/DUBAI-PATH.pdf