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 to name a few. Another key factor which has always held a material weighting as a determining factor of real estate values is transport infrastructure.

There exists a body of empirical 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. Overall this work indicates that the introduction of MRTS has been a net positive for real estate in these cities, leading to not only outperformance of properties in the immediate vicinity of MRTS compared to wider real estate markets but also reducing congestion and enabling the development of new business districts and lifestyle destinations.

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 in a similar manner to those aforementioned MRTS. This study focuses on the impact of the Red Line only.

Key Takeaways

• From Q1 2010 to Q1 2018 prices for residential units within a 15 minute walking distance to key Red Line Metro routes have outperformed the wider residential market.
• Over this period, average mainstream prices in Dubai grew by 28%.
• Whereas prices for residential units which are within a five minute walk of a Metro station have grown by 51% on average, those units within a 10 minute walk have seen price growth of 58% on average and finally those within a 15 minute walk have seen price growth of 33% on average.
• Despite this positive price growth trend, we find that on average as we move further away from the Metro, the price per square foot begins to increase and achieves a premium over the average rate achieved in Dubai.
• As at Q1 2018 the average price per square foot for buildings within a five minute walking distance to the Metro was recorded at 4% below Dubai’s average price per square foot, whereas those buildings within a 10 minute walk achieve a 9% premium and those buildings within a 15 minute walk to the Metro achieve a sizeable 32% premium over the Dubai average.
• Rental data on a building-by-building level from Q1 2014 to Q1 2018 shows that rents in residential buildings within a five to 15 minute walk to Metro stations increased by 1.8% on average. As with the trends seen in the sales market, Metro area rents have outperformed wider market rents where rents fell by 11%over the same period.
• There are a range of factors which may be driving such trends, one of the prominent factors is related to affordability. Properties in close proximity to the Metro tend to command significantly lower prices and rents when compared to more prime areas which surround these Metro neighbourhoods.
• Given this and the development of the population’s income profile, where over the 10 years to 2017, we have seen that the middle class of Dubai has grown substantially, currently households earning up to $150,000 per annum (AED 550,500) make up 60% of households, up from 40% a decade earlier. This has meant that there has been a strong level of demand in the affordable to mainstream segments of the market.

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 MRTS routes such as the Expo 2020 route (Red Line extension) which is due to be operational by 2020.”