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Dubai housing market ... rents remain flat.

Dubai's housing prices fall slightly in Q1

DUBAI, April 13, 2015

Housing prices fell slightly in Dubai, UAE, and rents were flat in the first quarter of 2015 in the emirate compared with the final three months of last year, a report by property consultants JLL showed on Monday.

The real estate market in Dubai continued to see subdued activity in the first quarter with the residential sale prices witnessing a marginal decline across both apartments and villas, the report stated.

The retail market continues to be constrained by the slowdown in spending, restricting overall growth levels, while the delivery of more Grade A office space has limited rental growth in the office sector. The hospitality market saw RevPAR’s (revenue per available room) drop on an annual basis, said JLL in its Dubai Market Summary for the first quarter.

The property expert pointed out that the first quarter saw the delivery of 730 residential units across Dubai. "An additional 22,000 are expected to enter the market by the end of the year, however we remain cautious of the delivery of some projects within the specified timeframe," it stated.

While Dubai’s rental market has maintained its overall stability during the first quarter, the Reidin sales index depicts a marginal decline in prices across both apartments and villas.

This comes as the Reidin rental index shows growth levels dropping to eight per cent year-on-year (y-o-y) in February 2015 (from 23 per cent y-o-y in Q1 2014). Similarly, the Reidin sale price index shows a decline in growth levels from 30 per cent to six per cent over the same period.

This downward trend is expected to continue throughout 2015, as JLL foresees prices dropping up to 10 per cent by year-end.

According to JLL, there has been an increased focus on affordable housing in the emirate.

As Dubai’s residential market moves towards a period of correction, the next driving force is predicted to be end-users or middle-income earners, as opposed to speculative buyers, stated the property expert.

The first quarter saw developer and government initiatives target the affordable housing sector. On the development side, Nshama launched two phases of its Town Square project, Zahra and Hayat, consisting of townhouses and apartments below Dh600 ($163)/per sq ft, located close to the Arabian Ranches, it stated.

The Dubai Municipality, meanwhile, has proposed to introduce mandatory affordable housing quotas for all new residential developments.

In addition, it allocated over 100 hectares of land for affordable housing across various locations in Dubai, targeting buyers and tenants with monthly salaries of Dh3,000 to 10,000 ($817 to $2722).

On the retail scenario, JLL said the first quarter saw Dubai market remain largely stable. Despite recording strong annual growth levels, average retail rents registered no quarterly increases, said the expert in its report.
 
Similarly, vacancy levels remained at eight per cent as no major deliveries took place, except for the handover of ‘Box Park’ by Meraas. The subdued nature of the retail market comes as the industry copes with a drop in the number of visitors from Russia, while the weak euro threatens visitors from the Eurozone, the report added.

JLL said the performance of the retail market was expected to remain stagnant throughout 2015, following estimates of a slowdown in retail sales growth figures.

The latter is likely to put pressure on retailers and squeeze out some of the small and mid-sized tenants as they become burdened with achieving targets to meet high rents.

While occupancy rates remain strong at 86 per cent, the increase in supply continues to outstrip demand, placing downward pressure on average daily room rates.

On the office sector, JLL said Dubai market remained relatively stable over the first quarter, with average rents across the central business district (CBD) registering Dh1,880 ($511)/per sq m and vacancies recording 23 per cent.

The demand for Grade A quality stock continues to be robust, particularly in the DIFC (Dubai International Financial Centre) and it’s surrounding precinct (for example, Daman Tower), evident by the rate of leasing activity, it stated.

In turn, demand for Grade B office space remains weak, exerting downward pressure on asking rents.

The first quarter saw the handover of Central Park in DIFC, adding approximately 130,000 sq m of office space to the market. This brings the total gross leasable area (GLA) to 7.7 million sq m as of the first quarter of 2015, it added.

On the hotel sector, JLL said it continued to face downward pressure in the first quarter. While occupancy rates only dipped marginally (two per cent y-o-y), the ADRs (average daily rates) plunged five per cent to hit $273 in the year to February.

This negatively impacted RevPar (revenue per available room), which saw a seven per cent decline to hit $235 over the same period. While occupancy levels remain healthy and above the Middle East and North Africa (Mena) average, downside risk remains that ADRs will soften further in response to the additional 3,600 keys scheduled for delivery over the next nine months, the report added.

According to the real estate expert, the demand in the hotel sector was increasing at a slower rate. Dubai’s hotel market welcomed 11.6 million guests in 2014, according to figures released by the Dubai Tourism & Commerce Marketing.

While this represents a six per cent y-o-y increase, the rate of growth has declined from the 11 per cent registered in 2013. The slowdown can be attributed to a decline in the number of tourists from Russia and the Eurozone.

By contrast, tourist numbers from emerging markets have increased significantly. Guests from South Asia, Far East Asia and Africa increased 14 per cent, 13 per cent and 11 per cent respectively.

This comes on the back of rising wealth and changing consumer habits in emerging markets, in addition to increased efforts to diversify Dubai’s inbound markets, it added.-TradeArabia News Service




Tags: Dubai | hotels | office | residential rents | Q1 |

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