In the midst of Dubai’s softening housing market, XXII Carat, a development of 22 ultra-luxury villas on the Palm Jumeirah, has pre-sold nearly half of the project ahead of completion at the end of this year.
In the case of new builds, Dubai’s property market has remained characteristically buoyant, said Anton Yachmenev, managing director of the Forum Group, the Russia-based developer behind the ritzy beachfront community. He predicted an upswing for Dubai’s property market in the coming months.
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"Forum Group is not alone in this assessment, meaning that we can expect a much more competitive environment going forward," Mr. Yachmenev said.
On Monday, property consultancy Cluttons joined hopeful developers in a positive, albeit much more reserved, outlook for the rest of the year. In its Dubai Spring 2017 report, the group said market data showed that falling prices looked poised to level off by the end of this year and that the rate of price decline slowed in the first three months of 2017.
Dubai residential prices fell at an annual rate of 7.9% in the first quarter of the year—nothing to boast about, but a marked improvement over 2016, when prices fell 8.8%, Cluttons said.
Much of the weakness has been in the luxury sector, where high-end pockets of the city have seen double-digit price declines over the past year, according to Cluttons. Burj Khalifa, the city’s iconic mixed-use tower, was the weakest performer in the city and has seen a 25% price correction in its residential units in the past 12 months.
On the Palm, where XXII Carat is building ultra-luxe homes priced between $10 million and $25 million—some boasting bathtubs made from a solid block of crystal, as well as quartz and gold—villa prices have fallen 12.3% in the past year. Prices have fallen 11% for apartments on the man-made island, Cluttons found.
Luxury Baldi bathtub
XXII Carat / Forum GroupStill some developers are optimistic that the market is headed for a turnaround. "There is every indication that we will see strong growth in the next few months," said Mr. Yachmenev of Forum Group.
"We have now sold 40% of our units with construction expected to be completed towards the end of this year," he added.
Murray Strang, head of Cluttons Dubai, pointed to a different development under construction, which has excelled despite the dismal atmosphere.
"Bahwan Tower for example, which is located within the Burj Khalifa community, launched in November 2016 and is a prime example of sustained demand, as a strong sales performance continues ahead of a Q4 2017 completion," Mr. Strang said.
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He explained that the lifestyle and destination appeal of living in Downtown Dubai has endured and helped insulate the market from the fallout of global geopolitical events.
Off-plan residential sales—such as those in new developments like XXII Carat and Bahwan Tower—accounted for more than half of all deals in 2016, said Faisal Durrani, head of research at Cluttons, in the report.
"Regional and global economic uncertainty has undoubtedly curtailed domestic growth," Mr. Durrani said. "Despite this, the off-plan residential sales market has remained resilient and in fact accounted for 53% of all deals in 2016, suggesting that investor confidence remains strong."