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Freehold locations in Dubai witnessing price drops in Q2

DUBAI, July 14, 2019

The second quarter ValuStrat Price Index (VPI) for Dubai’s residential properties fell 11.5 per cent year-on-year (y-o-y) in capital values, with quarterly declines decelerating to 2.9 per cent in the second quarter (Q2) of the year.

This downward trend resulted in 29.3 per cent citywide capital value loss since the peaks of mid-2014, said ValuStrat, a leading local consulting firm.
 
All established freehold locations monitored by the VPI witnessed price drops since the last quarter, ranging from 1.2 per cent to 4.2 per cent.

The ValuStrat Price Index (VPI) which is a valuation-based price index for Dubai’s residential capital values, displayed an overall 11.5 per cent annual fall in capital values, with quarterly declines slowing to 2.9 per cent.

This downward trend resulted in 29.3 per cent citywide capital value loss since the peaks of mid-2014. All established freehold locations monitored by the VPI witnessed price drops since the last quarter, ranging from 1.2 per cent to 4.2 per cent.

On an annual basis, three out of 26 locations measured saw single-digit declines, villas in Palm Jumeirah and Al Furjan, as well as apartments in Dubai Sports City. Capital values dropped more than 15 per cent annually for apartments in Palm Jumeirah, Discovery Gardens, and The Greens.

“As capital values continue to soften, there was a relatively strong quarterly sales volume performance for nine months in a row, off-plan up 5.5 per cent, ready sales stable, when compared to Q1.This quarter also saw a record 10 per cent of all ready villa sales transactions, priced higher than Dh10 million ($2.72 million. Good market performance given that the holy month of Ramadan and Eid holidays fell on May and June,” said Haider Tuaima, head of Real Estate Research at ValuStrat.

The Dubai VPI also analyses residential rentals. The rental VPI is a 100 index with a base set for Q1 2014, it monitors 16 apartment and 10 villa locations within Dubai’s freehold market and compares similar units within those locations on a quarterly basis.

The Q2 2019 residential rental VPI in Dubai stood at 73.9 points, declining 26.1 per cent since 2014, dropping 3.4 per cent quarterly and 10.7 per cent annually. Dubai’s net yields averaged 5.7 per cent, with apartments at 5.9 per cent and villas at 4.7 per cent. The average residential occupancy rate stood at 84 per cent.

As far as residential supply is concerned, 8,487 residential units, just 25 per cent of the total estimated supply for 2019, have been completed so far. More than half of these completions were concentrated in three areas: Dubailand, Jumeirah Village Circle and Al Furjan. For the rest of the year, projected supply mix is composed of 80 per cent apartments (20,897 units) and 20 per cent villas (5,133 units), all expected to finish construction before year-end.

The second quarter ValuStrat Price Index for Dubai’s office capital values declined to 69.3 points, suggesting that average capital values are 30.7 per cent lower than the same period during the base year 2015, 16.1 per cent lower than the same period last year and 6.3 per cent below the previous quarter.

Office space in Business Bay witnessed the highest annual drop of 18.2 per cent and 7.7 per cent quarter-on-quarter (QoQ), Jumeirah Lake Towers was second in line with losses of 17 per cent year on year and 7.2 per cent QoQ. Downtown Dubai and Dubai International Financial Centre (DIFC) saw the least annual declines of 10.5 per cent and 5.3 per cent, respectively. DIFC was the only location with stable capital values since last quarter.

There were 374 office sales transactions during the second quarter, 3.4 per cent lower than the previous quarter. Overall transacted office prices were 10.9 per cent lower than last year, and down 2.1 per cent QoQ. The median transacted price stood at Dh7,373 per sq m (Dh 685 per sq ft). Business Bay was the most popular choice for office sales with a share of 52 per cent, followed by Jumeirah Lake Towers (JLT) with 27 per cent of overall office transactions this quarter.

Median office asking rents declined by 7.5 per cent YoY and fell 2.3 per cent QoQ. Asking rents for this quarter were 15.9 per cent lower than two years ago. The citywide median asking rent for a typical office size stood at Dh945 per sq m (Dh88 per sq ft). Commercial office occupancy in Dubai was estimated at 82 per cent.

The year began with a total of 91,085 hotel rooms and 24,882 hotel apartments within 716 hospitality establishments. As of April, total hotel rooms and hotel apartments stock stood at 93,734 rooms and 24,648 keys, respectively.

Total international guests Jan-May 2019 reached 7.16 million, no change when compared to the same period last year. Citywide occupancy rate for the same period stood at 77 per cent, down 5 per cent YoY. Revenue per Available Room (RevPAR) and Average Daily Rate (ADR) witnessed double-digit declines on annual basis, plunged 15.6 per cent and 10.7 per cent, respectively.

For industrial properties, observations were that asking prices were normally inflated to allow for negotiation. Agents are finding it difficult to advise owners of achievable asking rents as landlords are still not willing to reduce the rates on their asset.

This results in properties being available in the market for longer periods with eventually the price being negotiated down. Notable QoQ changes in rental and price rates have been observed in Jebel Ali Free Zone particularly for older aged properties and with lower eaves headroom height. – TradeArabia News Service




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