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Real estate value in Dubai impacted by proximity to metro station

Real estate value in Dubai impacted by proximity to metro station

Gulf News, 6 November, 2018

Dubai: Prices for residential units in Dubai that are within a five-minute walk to a metro station have grown by 51 per cent on average between Q1 2010 and Q1 2018, showed Knight Frank’s Dubai Metro 2018 report released on Tuesday.

This study looks to identify if the Dubai Metro — which first started operations in September 2009 with the opening of the Red Line and then the Green Line in 2011 — has impacted residential capital and rental values. The body of work, which studies the impact of the introduction of Mass Rapid Transport Systems (MRTS) on real estate values from ever developing cities such as Beijing and Mumbai to comparatively developed cities such as London, indicates that the introduction of MRTS has been a net positive for real estate in these cities.

The Dubai Metro 2018 report focuses on the impact of the Red Line only, which runs between Jebel Ali and Rashidiya Metro Stations.

While real estate values are impacted by a variety of factors such as the location of the property, the quality of construction and finishing, amenities and the overall local community, another key factor which has always been a determining factor of real estate values is transport infrastructure.

The study showed that from the first quarter of 2010 to first quarter of 2018, prices for residential units which are within a 10-minute walk have seen price growth of 58 per cent on average, whereas those within a 15-minute walk have seen price growth of 33 per cent on average.

Over this period, the average mainstream prices in Dubai also grew by 28 per cent.

Numbers also showed that in Q1 2018, the average price per square foot for buildings within a five minute walking distance to the Metro was recorded at four per cent below Dubai’s average price per square foot, whereas those buildings within a 10 minute walk achieve a nine per cent premium and those buildings within a 15 minute walk to the Metro achieve a sizeable 32 per cent premium over the Dubai average.

Rental data on a building-by-building level from Q1 2014 to Q1 2018 showed that rents in residential buildings within a five to 15 minute walk to Metro stations increased by 1.8 per cent on average.

Taimur Khan, Research Manager, commented: “Given the trends identified in Knight Frank’s Dubai Metro 2018 report, it is not a surprise we are seeing increased appetite from developers to focus developments along existing and upcoming Mass Rapid Transport Systems (MRTS) routes such as the Expo 2020 route (Red Line extension) which is due to be operational by 2020.”

As with the trends seen in the sales market, Metro area rents have outperformed wider market rents where rents fell by 11 per cent over the same period.

Among a range of factors, which may be driving such trends, is related to affordability. Properties in proximity to the Metro tend to command significantly lower prices and rents when compared to more prime areas, which surround these Metro neighbourhoods.

Considering these factors and the development of the population’s income profile, over the 10 years to 2017, the middle class of Dubai has grown substantially. Currently, households earning up to $150,000 per annum (Dh550,500) make up 60 per cent of households, up from 40 per cent a decade earlier. This shows that there has been a strong level of demand in the affordable to mainstream segments of the market.