DUBAI // The first signs of a Metro effect on the property market are starting to appear, with analysts reporting a price discrepancy in favour of properties close to stations. In one such area, Jumeirah Lakes Towers (JLT) on Sheikh Zayed Road, flats in buildings directly opposite the Dubai Marina station are selling for 6.5 per cent more than units in buildings further away - a premium that could equate to tens of thousands of dirhams, according to a Dubai-based estate agency.
Several other agencies said they were receiving more inquiries about units in buildings within walking distance of the stations. The trend shows that with less than three months until the Metro's Red Line opens, home buyers are starting to factor future ease of transport into their choice of home. In the rental market, however, some said a clear difference in values would probably emerge only after the line opens on September 9. Many residents feared landlords will exploit proximity to the Metro by raising rents.
"For residential [sales] we're seeing a higher demand because of accessibility to the Metro, but this is only for properties situated almost directly outside a station," said Michael Michael, the sales director of Landmark Properties, a Dubai property brokerage. For example, he said, units in Indigo Tower, a JLT building near the station, were going for around Dh800 (US$218) a square foot, compared with an average Dh750 across similar-quality buildings in JLT. For a typical two-bedroom flat, this difference would amount to about a Dh60,000 premium.
Mr Michael said units near Metro stations had been more resilient to sinking values. In the first three months of the year, the average sale price for completed and nearly completed flats and villas fell 34 per cent, according to Landmark Advisory. It said average residential sales prices were now at the level they were at the end of 2007. Whether or not prices have bottomed out remains a subject of much speculation.
Andrew Delport, the head of property management at the Dubai-based property portal Gowealthy.com, said he believed units with easy access to the Metro would recover first, but only after the system was up and running. Looking at rents in the JLT development, Mr Delport said once the Metro station opened and construction on several partially built towers was complete, rents would go into "full swing".
"Once those things have been put to bed and settled down, you'll really see the impact of the Metro rail, and the station, particularly, will become more important." Murali Kumar, the owner of a two-bedroom apartment at JLT, said he had bought in the area with an eye on the Metro giving him a healthy rental return. "The development falls between two stations, making it easy for many residents here to access the Metro," he said.
"This is one of the reasons why I brought property at JLT. We hope its value goes up despite the economic downturn." In Dubai Marina, meanwhile, Mr Delport expected a similar trend. "With the Metro on the Marina side of the freeway - you'll definitely see the impact. "If you look at the movement there, the tenancies, it's much more vibrant than other places, and it's good value for your money. "It's plateaued out and you'll see rents there reacting to the Metro, possibly more than anywhere else."
Dubai Marina is the most popular area for all leasing, accounting for 30 per cent of new annual lease contracts in Dubai, according to Landmark Advisory's second quarter 2009 report. Ian Hainey, a sales consultant for Powerhousedubai.com, said estate agents were keen to highlight any available access to the Metro when taking prospective tenants on property viewings. However, he said there was still no discernible difference in rents between properties that had Metro access and those that did not.
The remaining uncertainty over exactly which stations would open on September 9 might have blunted the impact on prospective tenants' decision-making. "There has been no evidence of the potential of future Metro access helping matters in the rental field," Mr Hainey said. "Also, many are still in the dark about how long specific stations will take to open, so won't tend to make a decision based on this.
"People living in areas such as JLT almost always have cars, so it will only be when the dust settles on the station openings that we will see any effects on prices." Even so, tenants in areas including Bur Dubai and Karama said there was already talk of rents surging when the Metro opened. Sunil Nair, resident of a building close to the Al Karama station, said the building's owner had "hinted" at increased rents.
"There is a hype about the launch of the Metro and building owners are playing along with this," he said. "Many residents here have been told that the rents will increase since the building is located close to the station." Residents close to Burjuman shopping mall in Bur Dubai said the surrounding residential area would be in high demand once the station opened, putting pressure on rents. Anand Subramanium, a resident of Silver Sands, said: "With the Burjuman station being operational, many people will use it to reach work and this will become a prime property area."
In cities with established mass transport systems, such as Bangkok, London and Dublin, homebuyers pay a premium of at least 10 per cent for the convenience of owning a home near a station. Many have speculated that a similar trend would appear in Dubai. "Certainly, in Dublin many properties went up in price by up to 10 per cent and the interesting thing is that the price increase didn't happen until a number of months after the metro was launched," Mr Hainey said.
"What's for sure is that properties within walking distance of the Metro station give agents another selling point to highlight, making the property more attractive. "There is a great chance that prices of properties nearer Metro stations might hold a higher value in the future, after it is up and running and uncertainties, such as parking, stations, etc, all become clearer. "At the moment, market conditions, such as job insecurity, bank lending, falling rents and general uncertainty remain the real factors when it comes to property sales."