Exchange rate sees Palm Jumeirah buyers dump units

Villas on the project are some of the most expensive in Dubai.

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Foreign buyers of property on the Palm Jumeirah are taking advantage of exchange rates to ditch their purchases while avoiding a loss.

Asteco Property Management, a Dubai-based real estate company, made the discovery in a survey of prices for apartments, villas and commercial properties in the emirate, which broadly remained stable in the second quarter 2010. It found that, although the price of units on the Palm had decreased in value, new investors are cashing in on the strength of the dirham.

Villas on the Nakheel development are some of the most expensive at around AED1,800 per square foot, according to The Asteco Q2 2010 Report. This year has seen new supply to the market from Marina Residences in the first quarter and the delivery of Oceana Residences in the second quarter of this year.

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But Elaine Jones, CEO, warned that market prices could vary from unit to unit within a particular property, with lots on the palm-shaped development off the coast a case in point.

“We have noticed some overseas clients, who bought property on Palm Jumeirah, are prepared to sell at a much lower price per square foot as the exchange rate is more favourable without them incurring any discount,” she said.

Though rentals for residential and office space continued a downward trend, villa rents fell by just 4% on the second quarter 2009.

On the rental side, Dubai saw an increase in the number of units coming online over the second quarter of 2010 forced prices down, providing tenants with the opportunity to move to better locations or larger properties. Overall, apartment rents declined an average of 8% compared to the first quarter of 2010.

Villa prices overall were similar to the first quarter of 2009, except The Meadows and The Springs, where prices declined 5 and 6% respectively. This was “mainly due to the large number of units available in the area, their age and the fact that owners who initially bought into this development at low launch prices, are in the position to reduce their asking price without making a loss,” according to the report.

On the commercial front, the report found a downward trend in office rents. Office inventory continues to enter the market especially in the new commercial areas of Business Bay, DIFC and Jumeirah Lakes Towers. The Sheikh Zayed Road area has experienced falls, but continues to remain a popular choice due to its easy access, established infrastructure and the opening of new Metro stations.

The Dubai lease guide for June, issued by Landmark Advisory real estate consultancy, reported that lease rates have plummeted in the last two months, due to an oversupply of residential apartments and office space in the city.