House prices for villas in Dubai rose so rapidly over the last three months that they now cost 14 per cent more than they did in early 2008.
According to Jones Lang LaSalle's (JLL) market report for the third quarter of the year, to be published at the Cityscape exhibition in Dubai today, villa prices in the emirate rose by 23 per cent over the last 12 months alone as demand began to return to the beleaguered property market.
Apartments in Dubai also rose in value over the year, according to the report, recording 4 per cent increases in sales values. However, they still cost 18 per cent less than they did during the market peak four years ago.
The report found that house prices in Dubai rose by an average of 14 per cent over the twelve months to August and rents increased by an average of 7 per cent as the emirate's property market showed further signs of recovery.
The total number of homes in Dubai increased by around 2,000 homes in the third quarter to reach a total of 349,000 .
However, in Abu Dhabi it was a completely different picture.
Average asking prices for homes within the city's investment areas dropped by a further 3 per cent in the third quarter, to Dh10,200 per square metre, or a huge 53 per cent discount from the market peak of Dh21,500 per square metre at the end of 2008.
Asking prices for apartments stood at around Dh11,200 per square metre while average asking prices for villas were approximately Dh9,300 per square metre as the city continued to see an oversupply of new homes.
JLL said that approximately 2,200 new homes were delivered in Abu Dhabi in the third quarter. The majority of these units are in Al Rayanna Complex, Al Falah Community, Al Maha Tower and Al Durrah Tower on Marina Square and Al Ward Villas on Al Raha Beach, bringing the city's total housing stock to approximately 202,000. With up to 6,000 units scheduled for completion in the fourth quarter, the agent said the total stock could reach 208,000 units by the end of 2012, although further delays are expected.
However, JLL said that the sales market in Abu Dhabi had shown signs of increased activity in the third quarter with interest primarily from Emirati purchasers.
"Market sentiment is definitely improving and both Dubai and Abu Dhabi remain major drivers in the regional real estate market, but we are continuing to move away from one holistic model," said Alan Robertson, the chief executive of JLL MENA. "As the market continues to mature we will see more divergence. Well managed, high quality assets in prime locations will continue to perform whilst those in secondary locations will need to be ever more creative to attract and retain tenants who now have ever more choice and are moving with their feet to source and find the best deals available."
"In terms of market specifics, it's a very fragmented picture," Mr Robertson added. "Dubai is generally ahead of the curve as rents are finally starting to pick up whilst indicators suggest Abu Dhabi has yet to bottom out."