Dubaiís real estate sector, currently ranked as the most transparent market in the Middle East North Africa region, is on course to get a further fillip with the enforcement of an impending law aimed at protecting investors, according to a global financial and professional services company specialising in real estate.
Dubai Land’s new law, which allows investors to cancel their contracts and get their money back in cases where developers violate the terms and conditions, is expected to boost investors confidence, Jones Lang LaSalle, or JLL, said in its half-yearly review of the property market. It will also pressurise developers to finish their projects, the review said.
Under the new law that would ensure more transparency and better regulation of the real estate market, investors can cancel their contract if the property handover is delayed for more than a year. Investors are also eligible for compensation if the handover is delayed for more than a month. Under the new law, investors will have the option to demand compensation in the event of defects in the property when it is delivered.
“Signs of improved investor confidence have flowed into the real estate sector, with continued demand for quality, well-located, income producing assets,” JLL said in its report.
It noted that the main transactions that took place in the first half of 2012 were the sale of Building 6 in Gate Precinct at the Dubai International Financial Centre and the transfer of the 50 per cent Kerzner share in Atlantis the Palm Jumeirah to Istithmar World. In addition, around 11,400sqft of mixed-use space was sold in Burj Khalifa in June.
The property consultancy company observed that the overall residential market is seeing a positive trend with the villa market continuing to outperform the apartment sector in the second quarter 2012.
“Prime residential buildings in well established locations continue to see improved performance, but secondary locations are still suffering from rental and pricing declines,” it argued.
In the second quarter, around 3,000 additional residential units were added to the Dubai market, bringing the total current residential stock to around 344,000 units. The majority of the completions were apartments.
Notable projects handed over this quarter included The Villa - phase three in Dubailand, two towers in Dubai Marina, three buildings in Dubai Silicon Oasis and a complex of 26 buildings in International City, it said.
In the first half, there has been limited new office supply entering the market. “Asking rents for prime office space remained flat in the second quarter but secondary rents have softened. Occupier consolidation remains a key focus and in line with global trends, portfolio optimisation has been noticeable in Dubai during the first half of the year. Larger companies continue to show interest in upgrading premises with more flexibility in their leases.”
A sustained strong demand for retail space in the best performing super-regional malls, including Dubai Mall and Mall of the Emirates, resulted in an increase in prime rents to Dh5,400 per square metre, JLL said. “However the retail market is becoming increasingly two-tier and older, less popular malls are seeing weakened demand from consumers and retailers, with mall owners having to consider new marketing techniques and product positioning.”
The recovery of the hotel sector witnessed during 2011 has continued further over the first half of 2012, with occupancy levels improving to 83 per cent from 79 per cent in the same period last year. “The growth has been mainly supported by a strong tourism sector and a very encouraging number of visitors,” the JLL report said.