Its fourth-quarter report on the emirate’s property sector said that while Dubai could see a broader based real estate recovery in 2013, issues such as oversupply and the UAE central bank’s mortgage proposal could weigh.
Commenting on the report, Craig Plumb, head of research at Jones Lang LaSalle in MENA said: “The recent UAE Central Bank announcement about caps on mortgage loan-to-value ratios shows that government authorities are concerned about market stability and want to avoid any rapid increase in real estate prices.”
He added: “2012 ended with a flurry of new project announcements as increased confidence has returned towards real estate.
“While there has been a recovery in rents and prices in the residential, retail and hotel sectors during 2012, this improvement remains focused on a relatively small number of projects,” he said.
“As we move into the New Year with renewed optimism, we are likely to see a broader based recovery in 2013 but this recovery will remain challenged by the current over supply and high vacancy levels.”
The Jones Lang LaSalle report said Dubai’s overall residential market recorded a positive year, with the villa market continuing to outperform the apartment sector.
It said prime projects in well established locations continued to see improved performance, but secondary locations were “still suffering from rental and pricing declines as tenants relocate to new high quality projects”.
The report added that Dubai’s real estate investment market had remained quiet over the fourth quarter of the year with no major open market commercial transaction recorded.
“Despite the lack of transactions, investment sentiment in Dubai is improving. The optimistic outlook is reflected in Jones Lang LaSalle’s latest Investment Sentiment Survey, which shows investors from the region perceive Dubai as the preferred market,” the report said.
Improving sentiment and stronger economic fundamentals have resulted in a series of new large-scale projects being announced, it added.
The most significant of these is Mohammed Bin Rashid City to be developed jointly by Emaar and Dubai Properties.
The new city will include the world’s biggest shopping mall (Mall of the World), a Universal Studios franchise, hotel facilities and a large public park. The project was initially launched back in 2008 but has been revised since then.
The JLL report also said demand remained strong for retail space in Dubai’s best performing super-regional malls, resulting in improved prime rents at AED 4,900 per sq m.
“The two-tier market continues, with older malls witnessing subdued demand from consumers and retailers, resulting in a wider gap between primary and secondary centres,” it said.
JLL also said the hotel sector had performed well throughout 2012, supported by strong tourist arrivals and the opening of a number of branded hotel chains.
It said occupancy rates had risen to 77 percent (year to November) compared to 74 percent in the same period of 2011, as well as an increase in both average daily rates and revenue per available room.
“This positive trend is set to continue in 2013,” the report added.