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Dubai’s Charm
Why Palm Jumeirah’s prestige developments are selling like hot pancakes
| Text : Ajay Shamdasani | Photo : www.thinkstockphotos.com |
Close to Dubai’s coastal residential district of Jumeirah is the man-made island of Palm Jumeirah. Palm Jumeirah is popular with the emirate’s expats, in large part because of its exclusivity and the fact that freehold ownership for non-UAE nationals is permitted – in stark contrast to most other parts of Dubai. However, properties must be worth AED1 million (US$272,000) for owners to receive a six-month renewable visa.
Created using reclaimed land comprised of 94 million cubic metres of sand and 7 million tonnes of rock – at a cost of over US$12 billion – Palm Jumeirah was the first and smallest of the three Palm Islands, alongside Palm Jebel Ali and Palm Deira. All three islands were developed by the stated-owned company Nakheel. Construction commenced in 2001 and the first homes were moved into by 2007.
True to its namesake, Palm Jumeirah resembles a palm tree and consists of a trunk, a crown with 16 ‘branches’ and a surrounding crescent island. It measures 5km by 5km and purportedly has a total area bigger than 800 football pitches. The crown is linked to the city by a 300-metre bridge, as well as a monorail.
Currently, 30 premier hotels are situated on its crescent, including the world-famous Atlantis, The Fairmont, Royal Amwaj and the Palm Grandeur. Notwithstanding the global recession’s impact, CBRE’s Matthew Green believes the area remains “hugely popular” and the “limited new supply” will continue to offer some protection against the negative impact of the economic slowdown.
Colliers International’s JP Grobbelaar attributes this to the “iconic nature and obvious prestige of the development”. However, he concedes that Palm Jumeirah may generated “a greater degree of speculative buying and selling and that this is reflected in the greater extent of value erosion experienced on the Palm Jumeirah than perhaps other parts of Dubai.”
Veteran real estate broker Joyce Joman, of Joyce Property Professionals, concurs: “The price per square foot for an apartment with full sea view is around AED 1,200 (US$327). A resort apartment has an average of AED 1,800 per square foot. Before the crisis prices were around 40 percent higher.”
It’s in stark contrast to the halcyon days of the first half of the previous decade when with within 72 hours of going on offer, Palm Jumeirah’s first 4,000 villas were all sold for AED 4.65 million (US$1.27 million) and signature villas and AED 2.8m (US$ 762,000).
Owners who sold in 2005 realised gains of between 100 to 150 percent on the original price, recalls Joman. At the top of the market in 2008, signature villas sold at an average of AED 25 million (US$6.8 million), while garden homes fetched AED 16 million (US$ 4.4 million), she adds.
Colliers’ data suggests Palm Jumeirah villa prices dropped by 69 percent in the first half of 2009, but have rebounded 10 percent since the third quarter of 2009. However, apartment sales prices, down by 52 percent since Q3 2008, remained soft despite indications of leveling off.
Rental rates have also declined since Q3 2008. In Q1 2020, apartment rentals showed an average year-on-year drop of around 13 percent although rentals on two and three-bedroom apartments have witnessed a marginal increase since Q4 2009.
Owing to falling sales prices, rental yields have risen throughout 2009, from 6.8 percent in Q1 2009 to approximately 10 percent in Q4 2009, while overall rental yields across the market dropped from 9.2 percent to 7.3 percent during the same period. “This trend is likely to continue for the first half of 2010, although the rental market is witnessing some movement, particularly from tenants seeking better-quality property,” says Joman.
She stresses that despite lower prices, project delivery speed has “tremendously been affected”. Another landmark scheduled right in the middle of the trunk of Palm Jumeirah, the Trump Tower, has been cancelled for now. “Some hotels which were supposed to open their doors at the beginning of 2010 are delayed to the end of 2011,” says Joman.
According to Colliers’ research, there are approximately 4,000 apartments and 2,500 villas on Palm Jumeirah. The most recently completed are the 900 units at Marina Residences. On the trunk of Palm Jumeirah, Tiara Apartments are still under construction and Colliers are advised that they should be ready for handover in April 2010, says Grobbelaar.
Many buildings will likely be handed over soon as most owners are now due to pay their last installments. “As not everybody is in the position to pay their last installments there are some very good deals available,” says Joman. Some owners are willing to lower prices below market levels for quicker sales.
Following high mortgage rates, UAE banks and finance companies are finally reducing lending rates and are relaxing lending criteria, a measure that should broaden the buyer base and boost the fortunes of the real estate sector, with completed properties such as Palm Jumeirah being their first choice of investment, says Joman.
Similarly, Green also sees reason to be upbeat for Palm Jumeirah’s rental market because of “limited supply, and its popularity amongst Emiratis, GCC nationals and expatriates, coupled with “being regarded as one of Dubai’s pre-eminent residential areas … you can find some of the most attractive and sought, after villas in the emirate, in a prime location that is both close to the beach and the CBD,” says Green.
While prices have dropped significantly since Q3 2008, all three experts are cautiously optimistic about Palm Jumeirah. “Whilst villa prices have shown a marginal recovery, we see this as tenuous and too early to place firm reliance on the trend. Apartment prices have not shown any recovery,” says Grobbelaar.
Apartments in Palm Jumeirah purchased during Q3 2008 have seen values fall as much as 52 percent by the end of 2009, while villas dropped 69 percent between Q4 2008 and Q2 2009. “It will however take many years before property prices return to pre-2009 levels.” says Grobbelaar.
Nevertheless, there are opportunities to be had and Palm Jumeirah is popular with Brits, Russians, GCC nationals and South Asians. “Current prices represent very good value. Whilst Colliers is cautious about the Palm Jumeirah market, the current time may well prove to be opportune for investors with some appetite for risk,” Says Grobbelaar.
He reasons that Palm Jumeirah remains a prestigious, high-profile development and a very good address. “Many international and local celebrities own property on Palm Jumeirah and it will remain an affluent area.”
More pointedly – and bullishly – one can buy in the secondary market “for original or close to original price,” according to Joman. “The Palm is a landmark in Dubai, it will always be special and there will always be a demand,” she says.
Apart from the influx of high-end retailers she expects in the coming years, Joman touts Palm Jumeirah’s properties as being relatively easy to rent owing to the brand equity and cachet of the address. “The fact that you can say ‘I live on the Palm’ is a unique selling point in itself. No other sales argument can beat that phrase. In the near future, when more shops are opened, it will be even more appreciated,” says Joman.
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