Dubai’s property market is validating the adage that the three most important factors in real estate are location, location, location. While much of the market is expected to post modest gains this year before rebounding more strongly in 2012, residential and commercial properties close to the emirate’s growing metro network are increasing in popularity and value at a healthier pace.
According to data compiled by the property management firm Asteco, rents for residential properties near some of the 29 stations on the Red Line, one of two lines of the Dubai Metro network, have risen by more than 10% since the route opened in September 2009.
Vineet Kumar, the head of business development at Asteco, said easy access to transport connections is a major selling point for clients looking for property and the demand for prime locations will drive up returns.
“People like to be near a transportation link,” Kumar told local media in early September. “Since the opening of the metro, properties in close proximity to a station have become a priority for many tenants, who are prepared to pay extra for the privilege.”
Both commercial properties in the city centre, as well as residential units along the Red Line’s 52-km route, have seen a boost in demand, and that trend is set to continue now that the 23-km Green Line, which opened Sept. 9, is in operation.
Daniel Norman, the director of sales and marketing at the Crowne Plaza Deira-Dubai, located within two minutes’ walking distance of the new line, has already begun encouraging hotel patrons to use the metro. “We’re really very delighted about the metro opening up just down the road,” he said.
Proximity to the new metro line, which is served by 18 stations and runs from Etisalat to Creek, is a priority for residential tenants, many of who would prefer to reside close to public transport. According to Asteco, a small property within walking distance of the Green Line could command an annual rent of Dh50,000 ($13,600), while a similar unit farther away could see Dh40,000 ($11,000).
Elaine Jones, the chief executive officer at Asteco, said she believes the rail network is in the process of changing the local property market. “The Dubai Metro has added a whole new market dynamic and as the network is rolled out across the emirate, the rental disparity will become even more pronounced than it is already,” she said.
To some degree, the metro is also dependent on real estate projects for its operational success. The Al Jadaf and Creek stations will remain closed for the time being because the property developments they are intended to serve have not yet been completed. They will become operational when there is demand for it – possibly in the next year or so.
The popularity of the metro with commuters from residential districts has inspired the Roads and Transport Authority (RTA) to declare that it would increase late night and weekend services. After announcing the expanded schedule, the RTA’s chairman and executive director, Mattar Al Tayer, said the decision to increase the number of trains had been taken to “better serve vital areas with high population density and malls visited by citizens, residents and visitors”. Any increase in services will also boost the business opportunities of shopping and recreational centres close to the stations, which in turn could raise their rental and sales value.
Although Dubai’s property market cannot depend on expansion spurred solely by the improving transport network, the rising prices along the main metro corridors will likely help put the sector on a fast track to wider growth.