10 April 2016
Dubai: A Room with a View
The price premium associated with a ‘view’ has been one of a subjective assessment in Dubai, however there are decades of research that exist in the global markets that quantify the effect of a ‘view’ on real estate assets. For example in New York, buildings that have a Central Park view trade at 118% premium, whereas in Perth, houses with a view of Swan Lake are 90% higher compared to units with no view. Due to the limited supply of units with a ‘view’, coupled with the hedonistic value (pursuit of pleasure), they trade at a higher price than their counterparts in the same postal code, or even in the same building.
A similar analysis in Dubai reveals that units with a ‘view’ of a landmark or a body of water trade at a premium. For example in Palm Jumeirah, apartments in the Shorelines development that have a road view are being transacted at a 25% discount relative to apartments with a sea view. Similarly in Downtown Dubai, using Burj Views as a proxy, apartments with a Burj Khalifa view are 14 % more expensive. However, the view may be a crucial factor in the premium, other factors such as layout and floor, also effect the premiums associated with a unit.
We opine that for the long-term investors, it is better to pay the premium for a view as the appreciation in the future will be higher compared to units without a view. Although the view may have substantial effects on price appreciation, other factors such as floor, layout and upgrades also play a pivotal role.
To download the full report click here: http://blog.reidin.com/PublicReports/UAE160411.pdf