18 May 2017
Dubai: The Return of The King?
A peak into the price cycles and unit launches reveals that developers have always tended to gravitate towards the higher end of the price spectrum in upmarket cycles to capitalize on the higher margins. Developers anticipated the current downturn and the greater demand for mid-market units by reducing the number of luxury launches as far back as 2012, reversing the trend in 2016, just as prices began to plateau. Whilst there is a confluence of reasons for this, we opine that as demand for the luxury segment signals a comeback, developers have responded by scaling up the launch.
The above charts reveal a dichotomy in terms of price performance in the current cycle, when dissected through the lens of apartments versus villas. In the current cycle, prime apartments underperformed city wide on the upturn, whereas the reverse was true in the villa space. On the downturn, apartments, both prime as well as city wide fell in tandem, whereas in the villa space, the price correction in the prime space has been greater than the city-wide index.
Given the fact that the zeitgeist has been dominated by “affordable” or mid-market communities for the last few years, the general consensus that the luxury segment has underperformed appears to be factual.