"Typically, when residential real estate is made available around transit hubs, the population tends to begin to grow faster in these areas compared to non-hub locations," Taimur Khan, Associate Partner at Knight Frank said
Connectivity and accessibility are key demand drivers for real estate, particularly in residential and commercial property. The inauguration of Dubai Route 2020 metro extension promises to do just that for the real estate close to it.
Properties close to transit hubs have historically outperformed the broader market, according to Taimur Khan, Associate Partner at Knight Frank, who noted as well that properties within a 15-minute walk witnessed a price increase on average of 33 percent over the 2010 to 2018 period.
“From 2010 to 2018, the average mainstream residential price per square foot in Dubai grew by 28 percent, whereas units within a 5-minute walk of the metro saw prices increase by 51 percent, and those within a 10-minute walk saw a 58 percent raise,” he told Zawya.
He also noted that the price-performance of properties located near transit stations has seen growth in several global cities, and areas built around metro links at affordable price points, like those in Discovery Gardens and in the Jebel Ali area, are expected attract both owner-occupiers and renters, which is likely to underpin population growth in these parts of the city.
“Typically, when residential real estate is made available around transit hubs, the population tends to begin to grow faster in these areas compared to non-hub locations. More so, being close to such transport hubs gives access to an increased pool of potential tenants, which is beneficial for any property investor. Looking at the current market particularly and the pressures being put on affordability, these areas may provide good investment opportunities,” he said.
NEWER OPENINGS FOR ASSETS
Gabriella De La Tour, Director, Consulting, CBRE, said that metro stations are vital hubs of activity and footfall, which naturally creates opportunities for a variety of support assets, such as retail. Developments that have direct access or lie close to new stations are expected to perform better, she told Zawya.
De La Tour said that the locations covered by Route 2020 (Jebel Ali, The Gardens, Discovery Gardens, Al Furjan, Jumeirah Golf Estates, Dubai Investment Park and the Expo 2020 site) provide a mix of both apartments and standalone units: villas and townhouses. At the moment, the trend in these areas is towards apartments, which represent the majority of the existing supply.
“Properties that are developed by well-known developers are more attractive to potential investors,” she said. “This reputation, complemented by quality product offerings, the location and complementary facilities, drives the demand for particular developments. Another key aspect that investors consider is the level of maintenance and services provided to support the upkeep and longevity of their investment.”
As focus areas near Route 2020, she listed the developments that have witnessed high interest from potential investors: MAG 5 Boulevard – Dubai South (By MAG), Golf Views – Emaar South (By Emaar), Urbana – Emaar South (By Emaar), Danube Villas – Al Furjan (By Danube), and Cherrywood Townhouses – Dubai South (By Meraas).
“If we look at transactions over the past six months, Dubai South and Al Furjan have been the most popular zones. The transferred and off-plan sales, as per Property Monitor data, show that Dubai South recorded 460 transactions, and Al Furjan has 200. Within the wider zone, purchases of apartments and villas were relatively evenly split, with two and three-bedroom units representing the most popular product from a sizing perspective.”
Overall, buyer demand in this area is driven by the affordability and availability of the right product type, she said. “Developments that offer community living and appropriate support facilities can attract purchasers. Location is expected to play an increasingly important role, particularly with the launch of Route 2020, as the wider accessibility and connectivity of these developments is further enhanced.”
SMALLER UNITS DEMAND RISE
Chris Whitehead, Managing Partner of Luxhabitat Sotheby’s International Realty, told Zawya that the new route would help increase the value of the small apartment buildings. The inauguration of the route has been a boon for investors, who have been witnessing a softening real-estate market, he added.
“More buyers and tenants will want to occupy the residences along the route and expand the radius of property demand around the route,” he said. “This demand will see a surge in prices for rental properties , give an appreciation to existing owners as well as get investor interest in new off-plan projects.”
The communities here currently range from the budget-friendly areas of Discovery Gardens to family-centric townhouses and villas in the Expo site area. Whitehead’s advice to the buyers is to stick to projects that are already under construction or have a greater possibility of completion. “Projects in Al Furjan and Dubai South will see better demand than most when things pick up the pace in late 2020 or early 2021.”
Among the current projects, he added, Al Furjan and a few projects by Azizi along the Discovery gardens metro route are going to be hot property; they have always been investor favourites. “In recent times, Dubai South has emerged as a clear favourite as it is the closest to the Expo site. Therefore, this area also promises higher attention when the Expo [starts] next year.”
Richard Waind, Group Managing Director, Better Homes, told Zawya that Discovery Gardens is expected to be the most impacted and will be the busiest station on the route. “This is because it opens up a key affordable community to the metro network, allowing workers to travel to the Marina, SZR, Downtown and the airport.”
“In a tenants’ market, we expect an increased demand for this well-established community that is likely to have a positive impact on values,” he added. “Current rents in this location are studio, AED 25–30K; one bed, AED 35–40K; and two beds AED 60–70K.”
From an investor’s point of view, he said, the metro adds further value to Discovery Gardens, where savvy purchasers are already picking up rental investments at gross yields above 8 percent. Additionally, the new route is servicing villa communities of Jumeirah Golf Estates (JGE) and Green Community, where most families will be operating at least one car. This means that the route will likely have less of an impact on values.
“However, we see Dubai and its residents are becoming more aware of their green obligations,” he noted. “So I suspect villas on a commutable metro route will become more attractive in the coming years, wherein a purchase on the new line now will likely be a savvy investment for the future.”
NEW SUPPLY SCENE
Areas on the new route have witnessed a significant amount of development over recent years, De La Tour said, citing CBRE estimates. “Close to 15,000 units were delivered in these areas over the past five years in anticipation of the Expo 2020 site, which is a key anchor for the surrounding area. Since January, we have witnessed the delivery of approximately 2,800 units across a mix of both apartment and villa typologies. These deliveries were primarily in Emaar South and Al Furjan.”
She continued: “At the moment, there are over 5,000 units under construction across the various areas under consideration, with the majority of this new construction occurring in Al Furjan and Emaar South. Out of these 5,000 under-construction units, 3,000 units are scheduled for delivery over the rest of this year. However, we anticipate that due to repercussions from COVID-19, some projects may face slight delays. In addition to projects under construction, over 4,000 units are in the planning stages or announced to be delivered by 2024.”
Prathyusha Gurrapu, Head of Research and Advisory at CORE, noted that most of the residential units coming up in these areas are in the range between affordable and mid-market segments. “Although we haven’t seen any value spikes, accessibility through the metro link is expected to provide further demand and relative resilience to the property in the areas directly connected by the new route. Buyers have been attracted by projects with enhanced connectivity, lower entry points and attractive payment plans. Most of the transactional traction is being witnessed in the Al Furjan and Dubai South areas, where most of the stock is available.”
PRICING AND RENTALS
The average rents in Dubai have faced downward pressures since the beginning of the year. “Since June 2019, average rents across various zones in proximity to Route 2020 have decreased by around 5 to 10 percent,” De La Tour noted. “In general, the market is responding to the unprecedented events over the past few months.”
“These trends highlight opportunities for end-users to secure more affordable accommodation than they could even a few months ago, and landlords are responding with more flexibility in terms of rental pricing and arrangements to bolster occupancy levels,” she added. “Sales prices across the focus areas have also decreased when compared to the same period in 2019, with decreases averaging around 10 percent. Similar to the rental market, these trends highlight the shift to a buyers’ market, with increased opportunities for investors and first-time homebuyers to capitalize on increased affordability.”
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