Special Features
New Developer Rating Indicates Deficit of Grade A Developers in Dubai
Landmark Advisory released its latest quarterly report which focuses on the Developer Rating of the top developers in Dubai. The quantitative evaluation carried out by a panel of industry revealed a deficit of Grade A developers in Dubai. Low ranking developers will contribute to the ongoing price divergence within the asset classes in both markets.Ms. Jesse Downs, Director of Research & Advisory Services, Landmark Advisory, explains “To date, much of the supply already delivered was built by master developers, which rank higher. However, these developers constitute the minority of the total pipeline of units within the next several years. The single-asset developers currently building the bulk of the forthcoming supply have a significantly lower rank and may suffer further credit downgrades as their product is forecasted to overpromise and under deliver. This phenomenon will create a bifurcation between integrated, high-quality units and those poor quality units within fragmented communities where many builders have postponed their developments indefinitely.”
The evaluation was based on three basic criteria: product quality, customer service, and overall perception. “Product quality refers to each individual developer’s track record and ability to deliver the product quality promised during the marketing and primary market sale of the unit. In some cases, developers have not delivered any projects locally. In this case, they are graded based on the anticipated quality of their projects,” continued Ms. Downs.
Turning to residential sale trends in Dubai, the quarterly sale prices of villas remained unchanged and apartments declined 4.3% during Q409. “While villa prices remain unchanged on average, there is a variance of pricing emerging based on location,” explained Ms. Downs. “Sale prices for villa communities along Sheikh Zayed Road – which we refer to broadly as coastal communities – have increased while inland communities have decreased.
As indicated in Landmark Advisory’s latest findings, location and quality are driving apartment prices; while average prices decreased, select communities, including Palm Jumeirah and Downtown Burj Dubai, experienced slight increases.
According to Ms. Downs, residential leasing in Dubai has also regressed: “Average villa rents declined 2.2% while average apartment rents declined 3.0%. In select new residential areas, apartment rents have increased which is primarily due to all available residential units having been handed over recently. This type of marginal rent increase usually follows apartment deliveries, propelled by gradual occupancy gains after handover.”
