Your Road Map to Investing in Palm Jumeriah

Your Road Map to Investing in Palm Jumeriah

Talk to anyone about Palm Jumeirah and they’ll tell you how it’s considered one of the modern wonders of the world, not to mention an engineering marvel that boggles the mind.

Palm Jumeirah makes for an excellent investment proposition; new retail destinations are set to cover nearly two million sq. ft. as they enter the market in the next few years

Here’s a roadmap so to speak, of how the development aspect of Palm Jumeirah is divided, how the various properties are priced and what returns you can expect.

A Bird’s Eye View of ‘The Palm’

Palm Jumeirah is divided into three areas: the trunk, fronds and crescent.

The Trunk houses most of the mid-rise apartment buildings. The Frond exclusively has villas, townhouses and plots developed by Nakheel. And, the Crescent is where you’ll come across luxury resorts, although there are a few residential units to be found as well.

Almost the entire Palm exclusively has high-stakes luxury real estate, unlike many other master-level developments in Dubai. Average price for an apartment here is around AED 2,200 on a per sq. ft. basis. Villas average around AED 2,900 per sq. ft.

Even though there aren’t any long-term plans for now to add more residential developments, the hospitality market has great potential to grow. Just over 3,300 hotel rooms are under construction while 14 plots have been either marked for resorts and hotels or put on hold.

Nakheel Mall is set to open sometime in 2017 – 300 shops, including a clinic, a Waitrose and many leisure activities to cater to the community’s recreational needs.

Investing in Apartments

Most of the residential apartments are located on the “trunk” of The Palm. There are just over 5,800 apartments ready to be occupied; 20 building from Shoreline Apartments form the basis of 44% of the current supply which is roughly 2,600 units. So as one might imagine, this development sees many transactions both in terms of sales and rental leases.

Out of this total supply of 5,800, about 4000 are considered “high-end” quality, while the remaining 1,700 or so are considered “luxury”. A future supply is set to be delivered between 2016 and 2018 – 203 units have been graded as high-end, while 993 units are graded as luxury.

It should be noted that since 2012, there has been a growing trend for serviced apartments in Dubai. As a result, many new hotel and resort developments launched since also include a serviced apartment component. These serviced apartments are furnished units which can be bought and given to the hotel pool on rent, earning a high rental yield. All hotel apartments are considered “luxury”.

Investing in Villas and Townhouses

As of now, there are 1,354 villas and 220 townhouses on Palm Jumeirah. Between 70 and 100 villas as well as townhouses are part of a future supply which will form the basis of several hotels and resorts in the Crescent development area.

Most of the future supply for villas has been planned for the three fronds of The Palm where you can purchase a piece of land to have your own villa made.

Investing in the Hospitality Market

The Palm has a total of nine hotels and resorts. Another eight are under construction and six of these are set to become operational by next year. The largest resort is The Atlantis which boasts more than 1,500 rooms. Royal Atlantis, which will be adjacent to Atlantis is also under construction and will house 800 hotel rooms. Expectations have been set to have it completed by 2018.

On a whole, 2,262 hotel rooms will likely enter the market here by 2016 or early 2017 – Sea View Club, The Viceroy and the Kingdom of Sheba are just some of the properties which will also have serviced apartment or residential components, not counted as ‘hotel supply’.

Prices – A Brief Overview

Here’s a general rule of thumb: the higher the frond and the higher the location of any given unit on the frond, the higher the price. For example, villas facing the Atlantis or Marina Skyline might command higher prices.

Given the 2008 market crash, Palm Jumeirah was among the areas that took a significant hit. Garden Homes, for instance, which used to average between AED 14 and 18 million in sales, saw an average of AED 6 and 7 million between 2009 and 2010 respectively. Signature Villas which had previously reached an average range of AED 25-30 million were sold for a record AED 11-12 million around the same time. However, prices were quick to rebound on the fronds and aren’t too far off from the peak period.

General Investment Outlook

Dubai’s real estate market has experienced a cooling effect in the last year or two, particularly for finished developments. The market appreciated between 25% and 45% on average between late 2011 and early 2014. As a result, average prices of freehold apartments have depreciated 10.4% from their peak value. Similarly, villa prices have sunken by an average 7%.

In Palm Jumeirah, projects like Signature Villas, Garden Homes, Marina Residence and Shoreline are used as benchmarks as trading activities in these communities are rampant. Villa prices here have depreciated by 12% from their peak value, as of late 2014. Apartment prices have depreciated by 13% from their peak, dating back to early 2014.

Let’s put this into perspective: villa prices on The Palm appreciated from an all-time low in 2010 to 45.5% on average, a peak value which was achieved in the second quarter of 2014. Prices on an average actually grew by 11.3% per year. And, apartments in Shoreline appreciated approximately by 36% from their lowest value in 2010.

To get a complete breakdown of prices and the best places to invest in Palm Jumeirah according to your preferences, contact a registered real estate agent in Palm Jumeirah or rely on our network of real estate companies to lay out all options in front of you in a transparent manner, all the while making transactions completely smooth, quick and pain-free.

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