Knight Frank Q1 2014 Prime residential report: “Cooling” measures temper price growth in Q4 2013
Knight Frank reports that in the final three months of last year, signs began to emerge that residential price growth in Dubai may be easing to more sustainable levels. Indeed, both prime apartment and villa prices grew by 15% year-on-year in Q4 2013 – notably slower compared to the preceding four quarters, when the annual growth rate averaged 21%.
However, the deceleration in price gains didn’t come as a surprise. After all, a number of “cooling” measures were introduced in the final half of last year, including for example, the doubling in the transfer fee to four per cent and new mortgage caps.
That said, in November 2013, the Bureau of International Expositions (BIE) announced its decision to award Dubai the World Expo 2020, providing a boost to confidence. In turn, developers announced a number of large residential schemes; however, most of these were at the mid-range end of the market rather than “prime”.
Victoria Garrett, Residential Associate Director at Knight Frank, noted “new units worth Dhs10 million or over are expected to account for almost 10% of existing stock in 2014, but nearly all of these will be villas located on one development. Moreover, our estimates show that this figure will fall to 1.6% in 2015, before rising to 4.6% in 2016”.
Going forward, Knight Frank considers that prices could rise by 10-15% this year, with the differential between prime apartment and villa prices closing as the former outperforms. After all, the supply of apartments is expected to be by and large constrained this year. Moreover, average prime apartment prices are still about a third below their previous peak, suggesting that they have greater scope to play “catch-up”.