Tuesday 22 October 2019
 
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Dubai’s residential market to soften further, says expert

DUBAI, 12 days ago

Sales prices in Dubai are expected to continue to soften for the remainder of the year, by up to 5% in some instances, while rental rate declines appear to be slowing with decreases of just 1% witnessed during the third quarter, according to leading real estate services firm, Chestertons.

Continued pressure on Dubai’s residential prices and rates has been a result of oversupply, with an anticipated 50,000 new units expected to be delivered in 2019, a 150% increase on 2018 where supply topped just 20,000 residential units, said Chestertons in its latest research 'Observer: Dubai Market Report Q3 2019."

Nick Witty, the managing director, Chestertons Mena, said: "As we anticipated, there were further sales price declines in Q3 for both apartments and villas due to excess supply and muted economic growth. The rental market proved to be more resilient however, with a marked slowdown in the rate of decline."

"We anticipate the 10-year residency visa, the economic stimulus package and perhaps, more importantly, the introduction of the new Real Estate Committee, which has the mandate to boost demand and control supply, contributing to a more favourable outlook in Q1 2020," remarked Witty.

In the sales market, average villa prices were down 3% in Q3 while apartment prices witnessed a 4% decline from the previous quarter.

In the villa market, the Meadows and Springs were resilient with no change and remained at Dh850 per sqft, while Palm Jumeirah softened by 2% to Dh1,927 per sqft. Arabian Ranches witnessed the highest decline in Q3 at 5%, with rates now at Dh793 per sqft.

Prices at The Lakes and Jumeirah Park both declined by 3% to Dh1,010 per sqft and Dh804 per sqft respectively.

“The supply of brand-new properties, with their wealth of amenities, has resulted in older communities bearing the brunt with prices being lowered to compete for and attract end-users,” said Witty.

In the apartment sales market Business Bay, Downtown Dubai, Dubailand, Dubai Sports City and International City all witnessed very little change, declining just 1% compared to the previous quarter at Dh1,000 per sqft, Dh1,391 per sqft, Dh700 per sqft, Dh703 per sqft, and Dh478 per sqft, said the report by Chestertons.

In contrast, Dubai Silicon Oasis and Dubai Motor City saw the greatest declines of 12% to Dh612 per sqft and 10% to Dh 630 per sqft respectively, it stated.

Dubai Marina and the Greens, typically two of the best performing communities, both had more pronounced declines of 6% to Dh 1,030 per sqft and Dh849 per sqft respectively, a direct result of the current supply and demand equilibrium, it added.

In Dubai’s rental market, rates continued to soften in Q3, however the rate of decline has slowed with average villa and apartment rates softening by just 1%.

This could indicate the rental market is beginning to recover, which could be accentuated further by the three-year rental freeze currently being explored by the Dubai Land Department.

Several apartment communities in Q3 had no movement in rental rates including Business Bay, Discovery Gardens, Dubai Silicon Oasis, JVC and Motor City with a two-bedroom apartment in each community renting for Dh100,000, Dh75,000, Dh60,000, Dh73,000, and Dh90,000 per annum respectively, said the report.

The Views witnessed the largest decline in Q3 with an average 5% decrease with the studio format experiencing the most pronounced drop of 8% and now available for Dh55,000 per annum.

DIFC and The Greens saw rental decreases of 2% with a one-bedroom in DIFC available for Dh95,000 denoting an 8% decrease, while a studio in the Greens is currently renting for Dh50,000, a 9% Q-on-Q decrease.

“The decrease in rental prices in smaller units, in some locations, is indicative of tenants moving to larger properties that have become more affordable. This has resulted in landlords of smaller units reducing their rates to be more attractive to prospective tenants,” remarked Witty.    

In the villa rental market, Arabian Ranches, The Springs, The Meadows, The Lakes, Al Furjan and Jumeirah Islands saw no rate change from the previous quarter, an indication rental rates in these locations have bottomed out, particularly when considering Jumeirah Islands, the Meadows, and Arabian Ranches, all witnessed declines of 11% in Q2.

The biggest villa rental decreases were felt in JVT and Victory Heights with an average Q-on-Q decline of 3% with a three-bedroom available for Dh112,500 and Dh130,000 respectively, said the real estate expert in its report.

The volume of off-plan transactions rose by 45% and the value for the same category increased by 46% to Dh10.48 billion – suggesting positive signs of recovery, however, this could be attributed to developers registering units on mass as they near handover in Q3, it added.-TradeArabia News Service




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