Dubai’s luxury buyers are skipping overpriced, high-end new developments in favor of existing housing stock, according to a report from local brokerage Luxhabitat.
Prime residential transactions totaled AED 5.3 billion (US$1.44 billion) in the first three months of 2018, according to the brokerage, which drew on data from research firm Property Monitor. During that time, existing villa sales far exceeded those of off-plan new developments, where prices have yet to sync up with a depressed housing market. Overall, the total volume of off-plan transactions fell AED$1.7 billion (US$453 million), or 28% from the previous quarter.
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Luxhabitat defines luxury as sales in 15 upmarket neighborhoods, such as Downtown Dubai and the artificial island Palm Jumeirah.
Prime prices in Dubai have been in freefall since 2014, when the collapse of oil prices hit wealth in the region and many high-end buyers in the city. Recent market data show the emirate’s housing market has hit the bottom of its downslide, but developers have been slow to recalibrate prices for luxury developments.
Buyers have recognized the value of investing in the cooled luxury resale market, said Sally Ann Ghai, Luxhabitat’s associate director.
"They may realize more value from a cooled and increasingly rational secondary market; with sellers now reality checked in their asking prices, compared to developers who are front loading pricing in most prime off-plan developments," Ms. Ghai said in the report. She questioned whether developers would stick to their pricing given the state of the market.
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The strongest performing areas in the first quarter were established luxury neighborhoods like Dubai Marina, Downtown Dubai and the Palm Jumeirah. Dubai Marina accounted for one-fifth of all luxury transactions in the city.
"As long as homeowners have insulated their property value from perceived aging by undertaking well executed, tasteful contemporary upgrading and good care and maintenance, they are still very much in demand," Ms. Ghai said.
"Expect to see a revitalization in Dubai’s most well-loved prime communities."