For what has undoubtedly been a challenging period for the UAE economy, one positive takeaway is the UAE’s swift response and handling of the pandemic. Much has been said about the new normal, and the way in which the pandemic has and will continue to have an impact on society. At the forefront of this shift has been Working From Home (WFH) which is expected to continue in some capacity as most organizations seek to implement flexible working policies for their employees. As a result, individuals now spend the majority of their time at home. This effect in particular coupled with the ongoing efforts to make the UAE a more attractive long-term option for many expatriates, have left many sensing now may be the time to invest in top performing areas in Dubai whether it’s Downtown, JVC, Palm, Business Bay, or Dubai Marina.
The first half of 2021 has been positive for Dubai’s residential real estate market which has made a V-shaped recovery. In fact, with the performance shown in the first half of 2021, looking back, evidence suggests that Dubai’s property market bottomed out in November 2020.
At the centre of that recovery has been Dubai’s ready-sales property market, which has shown tremendous growth in transactions and value compared to this time last year. In fact, overall prices in the ready market have increased, indicating that while investors may be bullish, their optimism is not without caution. Meanwhile, off-plan property prices continue to decline as investors show affinity toward mature communities where demand continues to stay strong. The real question here is which of these areas is the most popular?
Dubai Marina captures the spotlight
As per a Bayut Dubai Real Estate Market report, Dubai Marina is one of the most searched areas by its users and has consistently made Bayut’s top 10 list of most transacted and most valuable communities. So what is it about the Dubai Marina that draws so much attention?
The Dubai Marina is an iconic neighbourhood, characterised by its waterfront promenade, luxurious yachts, abundant array of amenities, and its proximity to both Marina Mall and the popular JBR beach front.
For anyone that has had the opportunity to walk around the area, or to see the stunning views from the apartments, it’s clear why the Marina has become a target location for residents, tourists and property investors alike.
The entirely man-made Dubai Marina district was established in 2003, designed by HOK Canada and developed by the highly reputable real estate developer Emaar Properties – who are renowned for the quality of their developments and residential builds.
Why is Dubai Marina in high demand?
With much said about the overall decline of Dubai’s property prices over the past few years, this can rightly be attributed to oversupply in the market. Credit must be given where due to the government’s strategy in fighting the battle against oversupply seems to be paying off with vastly fewer launches announced this year and fewer new units expected to hit the market by year-end.
It is also important to note that much of Dubai has ample aged supply in densely populated areas which may need to be rebuilt sooner than anticipated. Thus, there is a possibility that the current oversupply equation can reverse rapidly as demand may increase much faster and overtake the current supply.
The optimism behind the ready sale market can largely be attributed to the lack of new supply in Dubai’s most popular areas. Most of the new supply in Dubai caters towards the affordable housing segment. The Dubai Marina is a fully developed area with limited new supply, which highlights the reason why it consistently maintains its position as one of the leading areas.
The charts below explain the supply trend in the area:
Dubai Marina prices peaked in 2014 at AED 1,820 PSF and had increased 100% from the 2010/2011 bottom. The prices over the last 6 years have corrected approximately 30-35%.
With limited upcoming supply, and a network of built up amenities and attractions, other factors that point investors into optimism whilst assessing the Marina are its high occupancy rates and a strong population increase trend.
The Dubai Marina has shown gains in AED PSF when comparing the first two halves of the year for the past two years for both studios and 1-bed apartments.
With studio apartments in Dubai Marina showing a percentage price difference of positive 12.9% in AED PSF when comparing H1 2020 to H1 2021, and positive 26% when comparing H1 2019 to H1 2021, and gross rent returns of around 5.7%.
Similarly, 1-bed apartments in Dubai Marina show a percentage price difference of positive 12.6% in AED PSF when comparing H1 2020 to H1 2021, and a 7.8% increase comparing H1 2019 to H1 2021, and gross rent returns of around 6.2%.
It also features at the top for the best performing areas in terms of increase in transaction volume value compared to H1 2020, showing a 176% increase for H1 2021 in comparison to H1 2020, as evident below (exclusive of mortgage transactions.) Also, in the first half of 2021 when Dubai’s residential property market posted 37.35K transactions (including mortgage transactions), with ready sale transactions making up 72% of the total.
Comparing the average transaction price of studios in H1 2021 to the same period last year, Dubai Marina has shown capital appreciation while studio prices in other areas have remained steady or declined. Thus, investors should keep a close eye on studios in particular with very few available overall in the area – which has been reflected in the price increases for two years in a row.
Short-term vs Long-term renting in Dubai Marina
One thing to note with the Dubai Marina area is that the price per square foot is relatively high and return on investment could potentially be lower. Although one can expect to achieve good rental income with it, yields relative to the price purchased at can be slightly lower than other investment options on a long-term basis. What many investors tend to do with their Marina properties is that they follow a short-term rent structure i.e. have the unit operated by a property manager and leased out as a holiday home on sites like Airbnb. What this does is that it allows investors to take advantage of the Marina’s location as a tourism and leisure hotspot. Net yields can go as high as 8-9% when compared to 4-5% as the Marina tends to attract droves of tourists looking to stay next to high-rise skyscrapers and tourist hotspots like JBR and The Walk, malls like Marina Mall and be close to airports like Al Maktoum Airport.
However taking into consideration the strengths listed, the fact that this is already a built area with an endless choice of establishments shows that it can still provide a good investment opportunity. As always, it is highly important to assess the properties on an individual basis to ensure you are getting a good market price, and to ensure that you are getting a good price relative to the market.
With a high demand for the well known area, this emphasizes the need to look to property experts. It’s not just about picking a ‘prime’ area when it comes to property investing, but one should be cautious that investing in a prime area requires even more diligence on the specifics of the building and price. With the Marina area featuring in the top performing districts for Smartcrowd, with crowdfunding returns of 7.13% per year (vs 4.9% market average), it nears the top for some of the best property investments.
So, why not take a look at our upcoming Dubai Marina property upon smartcrowd.ae on the platform.