Damac Properties is hoping that a switch from super-luxury apartments to more affordable suburban villas will help it weather the emirate’s property slowdown.
The developer, which moved its listing from London to Dubai at the start of the year, said yesterday that customers had agreed to buy Dh2.8 billion of homes off plan in the first quarter of 2015 – up 6.2 per cent from Dh2.63bn in the final quarter of 2014.
Damac has traditionally focused on building high-end apartments in the city centre, often with gimmicks such as cars or boats with the apartments they sell.
That worked well when house prices in the city were rising by as much as 30 per cent a year, as they did in 2013.
However, with the analysts JLL and Standard & Poor’s now predicting that average house prices in the city may fall by as much as a fifth this year, developers are attempting to change their product mix.
Speaking at the International Property Show in Dubai, the Damac chief executive Ziad El Chaar said that the company’s decision to launch hundreds of affordable villas at its 55 million square feet Akoya Oxygen scheme on the Umm Sequeim Road and hundreds more villas at its Akoya scheme in Dubailand was paying off.
“What we have done fairly successfully with the launch of Akoya Oxygen since August was realising that many people in Dubai have close to Dh2 million,” Mr El Chaar said. “They want to buy a three-bedroom unit. The only thing they can find for Dh2m is an apartment, while many of those people would prefer very much to buy a villa. So we designed for them in Akoya Oxygen the same size of apartment for the same budget.”
Damac is not alone in its strategy. Over the past few years many big names in Dubai development have opted to develop new villa and town house master plans on the outskirts of the city.
These include Emaar, which is developing hundreds of town houses at its Mira project in the Umm Sequeim Road area of the city, where it initially marketed three-bedroom town houses for as little as Dh988,888.
Tecom is currently developing 440 new Villa Lantana properties in its DuBiotech community, which it has been marketing at prices starting at just over Dh3 million.
And Dubai Properties is marketing villas starting at about Dh3 million at its nearby Mudon project.
JLL predicted in January that average house prices and rents in Dubai would fall 10 per cent during 2015 owing to a lack of affordability in the market and the recent global oil price crash, while Standard & Poor’s said they would fall 20 per cent because of increased supply and weakening investor sentiment triggered by the tumbling price of oil.
Damac said that over the past 18 months prices in Akoya by Damac rose from Dh960 per sq ft to Dh1,360.
Mr El Chaar said that the change in product mix was itself pushing down average prices in the emirate.
“Prices have been stable in the key areas of this market for the last nine consecutive months. All of us developers we’ve put a product on the market which is a little bit away from the city centre and the price per sq ft of the product, for example in the Umm Sequeim Street area is different from Downtown,” he said.
“Over the last nine to 12 months we have not seen a massive amount of projects being launched in the Burj area in the Marina. We’ve seen many more projects launched in the Umm Sequeim area or the Creek area where the price is not the same.”
So yes, the average price in Dubai fell, but not because the market is cooling down but because you have now many different projects commanding a range of prices in different areas.”