How Palm Jumeirah is starting to emerge from Dubai's property price downturn

Both apartment and villa prices on the world-famous Palm have increased in the six months to November despite overall declines in Dubai's market

Residential real estate prices fell faster in Dubai than any other major city in the world in the year to October but villa values are starting to see a turnaround in the emirate, according to new research.

While Knight Frank's latest Global Residential Cities Index for Q3 2020 showed that prices in Dubai fell by 8.1 percent in the past 12 months, positioning it at the bottom of a global list of 150 cities, it's a different story on Palm Jumeirah.

Neighbour Abu Dhabi was placed 147th with values falling on average by 5.6 percent in the same 12-month period.

Khan explained that while the headline data shows that average prices continued to fall in the year to November, villa prices have increased by 1.5 percent over this period. Villa prices in Dubai have also shown relative outperformance and softened by only 2.2 percent in the 12 months to November.

Established neighbourhoods with limited levels of new supply, such as the Palm Jumeirah, are also seeing early signs of market recovery, where both apartment and villa prices increased 6.2 percent and 4.2 percent respectively in the six months to November 2020.

Khan also told Arabian Business that despite the pressure on prices and unprecedented economic shutdowns, sales volumes in Dubai have been relatively resilient in 2020.

He said preliminary data showed that total sales volumes fell 16.4 percent compared to 2019, with the lack of off-plan sales underpinning to this decline (-32.1 percent), whereas activity in the secondary market increased by 7.2 percent in 2020 compared to 2019.

How Gulf cities fared in the Global 150 Cities Index

The major metropolises of the Arab World feature prominently in the latest index from Air-Inc, which ranks cities around the world for earning power and quality of life

By contrast, Manila and the three Turkish cities of Izmir, Ankara and Istanbul led the index, all registering annual price growth above 25 percent.

Canadian cities also rose up the annual rankings with four now sitting in the top 20 - Ottawa, Halifax, Montreal and Hamilton.

Taimur Khan, associate partner, head of research, Frank Knight, told Arabian Business: "Given an influx of supply and weaker demand levels, it is not surprising that we have seen prices continue to soften in both Abu Dhabi and Dubai. Whilst Dubai’s prices are under pressure from both increasing levels of supply and weaker demand, Abu Dhabi has largely seen prices soften as a result of weaker demand.

"However, it is important to note that residential real estate markets in both cities do appear to be entering a new cycle. In Abu Dhabi, whilst prices fell by 5.6 percent in the year to Q3, since then we have seen a marked moderation in price declines, where in the year to November, prices fell by 3.1 percent, the lowest rate of decline in five years."

He added: "In Dubai the rate of moderation in price declines has been relatively muted with prices falling by 7.8 percent in the year to November, down from 8.1 percent in Q3. Whilst these headline numbers provide some indication of the direction of markets, going forward as markets continue to become more fragmented by asset types and neighbourhoods, the headline data will become less relevant."

Knight Frank said its index’s annual rate of growth increased between Q2 and Q3 from 4.1 percent to 4.7 percent, citing record low interest rates, huge fiscal stimulus measures as well as a release of pent up demand in the third quarter as the main reasons for the uptick in price growth.

According to its figures, 15 percent of cities registered a decline in annual prices in the year to Q3, down from 18 percent in Q2, while 18 cities saw prices rise by more than 10 percent year-on-year, up from 16 in Q2.

Knight Frank added that all eyes are now on fourth quarter data when greater regional variations may emerge.

"Europe may see price growth moderate in Q4 due to recent lockdowns before a further of release of pent up demand in Q1 2021, while sales and prices in some parts of Asia may start to gain traction," it noted.

Separately, consultants ValuStrat said average values in Dubai slipped by just 0.1 percent in December, the lowest rate for three years.

Its VPI – Residential Capital Values for Dubai index stood at a stable 65.3 points, although this was still down by 13.8 percent on an annual basis.

It added that stability and marginal improvements in prices were observed in 90 percent of established villa communities as well as 63 percent of free-hold apartment areas