By: ADMIN |
2023-03-10 00:06:34
The freehold property stock in Dubai, as per Jones Lang Lassalle, has reached 664,000 units. Less than 10% of this stock is in villas/townhouses. The demand for villas/townhouses however surpasses supply. Therefore, their above average performance compared to apartments. More on this later - let us look at the numbers first.
6,000 apartment units were completed in first quarter of this year. Second quarter saw 7,000 apartment units completed. Total supply of apartments is expected to be 22,000 units by end of the year. 260 villas/townhouses got handed over in first quarter, 520 in the second quarter. Total supply of villas this year is expected to be 3,300. According to Asteco Property review, villa prices have gone up by 26% since over the last one year. However, the price is still 12% below the peak of 2014. What is more, the appreciation is only 47% since the market low of 2011.
Compare this with the apartments. They have only grown 15% over the last one year. Their prices are still 34% below their peak of 2014. Net appreciation since the market-low of 2011 is only 12%. Apartments are definitely underperforming. As for buy-to-let investors, rent for standalone villas grew by 64% and for townhouses by 33%. Apartment rentals grew by only 29%.
Coming back to the sustained demand of villas & townhouses, we have to go back to Q1 of 2020, when the pandemic hit. Back then restrictive loan-to-value of 75% meant you would need 33% cash to be able buy a house. For a Dh 1.5 million townhouse the cash requirement was Dh 0.5 million. The pandemic hit, prices started crashing and housing market was in shambles. This spurred the Central Bank into action and LTV requirement was reduced to 20%. Banks started adding parts of the fees to the loan and raised the LTVs to 85%. This reduced the cash requirement to 22%, translating to Dh 330,000. This level of cash pot was easy to raise for most end-user families, resulting in tripling of demand for houses. The parameters have persisted. Even though the Dh 1.5 million townhouse has risen to Dh 2.1 million, the cash requirement is still Dh 460,000 - a sum comfortable for families to raise.
