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Dubai residential market .... cooling off as new supply enters the market.

Dubai residential rentals, sales price slow down

DUBAI, October 20, 2014

Dubai’s real estate sector witnessed further stabilisation and a slowing down of both rental rates and sales prices of apartments and villas in the third quarter, said a report.

The downward trend continued for the third quarter in a row, stated real estate consultancy Asteco in its market report for the third quarter.

The apartment and villa rental rates dropped slightly by two per cent and three per cent respectively against the second quarter figures, with sales prices also showing a nominal decline at one per cent and four per cent respectively, it said.

However, the year-on-year growth remained positive overall with a 31 per cent and 17 per cent increase in sales prices for apartments and villas.

"For the first time since 2012 we have seen both residential rental rates and sales prices decline as a result of a natural adjustment to ongoing new supply entering the market," remarked John Stevens, the managing director at Asteco.

The impact of mortgage cap and higher transaction fees is also making it more expensive for prospective buyers to get onto the Dubai property ladder, he added.

The mortgage cap imposed by the UAE Central Bank which is 75 per cent for expatriates and 80 per cent for the UAE nationals has continued to restrict demand, exacerbated by the higher down payment requirement and four per cent Dubai Land Department (DLD) transfer fee, which was previously set at two per cent.

On a positive note, the report highlighted the launch of 27 new projects during Cityscape, last month, generating ‘strong levels’ of investor interest.

“It’s a wait-and-see scenario on the part of buyers right now, and we believe that sales prices may soften further with more new supply on the way. In the short term, a price reduction will be beneficial for the market as it will assist in unlocking demand from the middle income segments of the population,” noted Stevens.

In terms of apartment sales, the top performers in the third quarter versus the same period in 2013, were Jumeirah Lakes Towers (JLT) and Downtown Dubai, up by 37 per cent and 35 per cent respectively, and priced at up to Dh1,500 and Dh3,000 ($409 and $817) per sq ft respectively.

In contrast, areas like Jumeirah Village are currently available at Dh800 to Dh1,050 ($217 and $285) per sq ft, down three per cent quarter-on-quarter but up 32 per cent year-on-year.

Villas within the Al Furjan development, located on the Mohammed bin Zayed corridor, and on Palm Jumeirah, recorded per sq ft sales rate of up to Dh1,150 and Dh4,000 ($313 and $1088) respectively, with a four per cent quarter-on-quarter drop for Al Furjan and no movement for Palm Jumeirah, but still a strong 38 per cent and 55 per cent year-on-year growth respectively.

In terms of residential rental rates, Discovery Gardens and International City registered a seven per cent  drop following previous year-on-year record growth levels of 23 per cent and 40 per cent respectively.

The report highlighted the possibility of further rental increases for these communities as per the Real Estate Regulatory Agency (Rera) rental index, which could prompt further relocations to the Northern Emirates although it is anticipated that this trend will start to slow down as occupancy levels in the city’s more affordable communities stabilise.

In comparison, some of Dubai’s prime areas, such as Downtown Dubai, have remained relatively stable and Palm Jumeirah recording three per cent  quarter-on-quarter growth due to restricted supply and ever present demand.

“The popular Dubai Marina, which has suffered from long-term construction and traffic congestion woes, saw a two per cent  decline since the second quarter of 2014, as tenants look to relocate to more accessible areas,” said Stevens.

With quarter-on-quarter rental rate stability and a 42 per cent year-on-year increase, a two-bedroom apartment in Jumeirah Lake Towers (JLT) is currently leasing for up to Dh150,000 ($40,827) with the Dubai Marina equivalent fetching up to Dh185,000 ($50,353).

Villas also registered an average overall three per cent decline with the Springs down by eight per cent and Arabian Ranches and Mirdif both down by five per cent since the second quarter, which Asteco partly attributes to the impact of more affordable supply coming on stream in other communities such Jumeirah Village and Dubailand.

A three-bedroom villa in Arabian Ranches is renting for as much as Dh260,000 ($70,767) per annum currently while the same in the up-and-coming Jumeirah Village community can be secured for Dh145,000 to Dh180,000 ($39,466 to $48,992).

It was a similar story for office leasing, with zero growth registered in the third quarter following a nominal two per cent growth figure in the second quarter. Marginal decreases were also seen in Business Bay following the earlier 2014 release of new inventory.

According to Asteco, sales demand is being redirected from premium locations such as DIFC, which averages Dh2,200 ($598) per sq ft, to lower-priced properties in JLT such as Mazaya and Dome Towers, which are achieving around Dh850 ($231) per sq ft for shell and core office space.-TradeArabia News Service




Tags: Dubai | rents | residential |

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