Cavendish Maxwell, a leading property consultancy and chartered surveying firm in the Middle East, released its UAE Property Market Report for Q2 2019, containing key data and trends for Dubai, Abu Dhabi and the Northern Emirates. The report provides comprehensive insights on the health of the UAE’s property market as a whole, covering the residential, commercial, retail, hospitality and industrial sectors. The report was compiled by the firm’s in-house Strategic Consulting and Research team, drawing on proprietary data from its real estate intelligence platform, Property Monitor, and in collaboration with its extensive client and partner portfolio.
Commenting on the report, Aditi Hariharan, Senior Consultant, Strategic Consulting and Research at Cavendish Maxwell, said: “The first half of the year remained challenging for the UAE property sector, as rents and prices continued to decline. Conditions remain conducive for tenants who are well-positioned to demand rent-free periods, fee waivers and flexible payment terms from property owners, and potentially upscale to bigger units which may have previously been beyond their reach.
“Whilst we have noticed a slower rate of price declines in some areas over the last 12 months, this is still contingent on new supply and actual materialisation rates, which have averaged 40-50% over the past few years.
“The government continues to introduce measures to stimulate the market, with Abu Dhabi recently opening up investment zones to expat property buyers for the first time.”
Key market insights
The Q2 2019 UAE Property Market Report from Cavendish Maxwell revealed several key insights and trends during the quarter, which will likely continue into H2 2019.
Average sales prices and rents softened across most communities in Dubai in Q2 2019. However, over the 12-month period from Q2 2018, the average rate of price decline has slowed. Average apartment prices declined 15.1% and villa/townhouse prices declined by 14.7% in Q2 2019 from a year ago. During the same period, rental declines for apartments in Dubai averaged 12.5% and villas/townhouses similarly registered a fall of 12.6%. Off-plan transfers continued to dominate in Q2 2019, accounting for more than 52% of total transfers. In Abu Dhabi, average sales prices declined by 12.6% for apartments in major investment zones, from Q2 2018 to Q2 2019. Villa/townhouse prices registered a similar average decline of 12.1% over the same period. Rents in Abu Dhabi continued to fall in Q2 2019, for both apartments and villas/townhouses. The Northern Emirates of Sharjah, Ajman and Ras Al Khaimah remain affordable alternatives for buying and renting of properties in the UAE.
In Dubai, the weakening demand for office space in the face of oversupply is resulting in less office space being built. Investors continue to display interest in well-located Grade A assets, often perceived as low-risk with credit-worthy tenants. Abu Dhabi also witnessed subdued demand for office space in H1 2019 largely as a result of reduced business growth and corporate restructuring. In Q2 2019, rents for office space in prime and mid-quality buildings in Abu Dhabi declined by 2% on average. Due to Dubai’s oversupply and rental climate, rents in Sharjah and neighbouring Ajman have also come under pressure.
As of H1 2019, despite declining rents, occupancy rates also fell across retail establishments in Dubai. However, compared to the wider retail market, well-located community retail facilities with established catchments continued to showcase stable performance. Abu Dhabi’s retail market remained subdued, with slowing retail spend and the rise of ecommerce posing challenges. Retail rents in Abu Dhabi continued to decline, with a reported increase in vacancy levels. In Q2 2019, a number of malls were handed over, notably Mall of Umm Al Quwain and Sharjah’s Oasis Mall in the Northern Emirates.
In Dubai’s hospitality sector, occupancy levels declined during the first five months of 2019, along with a fall in Average Daily Rates (ADRs) - both of which led to a reduction in revenue per available room (RevPAR). Occupancy rates in Abu Dhabi also declined marginally, but with a rise in RevPAR. Whilst occupancy rates declined in Fujairah and Ras Al Khaimah, new tourist attractions are expected to aid future growth in the Northern Emirates’ hospitality sector.
In Q2 2019, the Dubai industrial market remained challenging, as tenants continued to seek better value. Enquiries for general trading spaces accounted for 44% - 52% of the freezone and onshore market respectively, followed by manufacturing, logistics and distribution centers. Neighbouring Abu Dhabi’s industrial sector has also recorded lower rents over a year-on-year period. Areas such as Mussafah and ICAD 1 registered declines of more than 10% in Q2 2019, compared to the same period in 2018. In the Northern Emirates, Ras Al Khaimah’s logistics sector is set to receive a boost following the launch of two new bulk cargo berths at Saqr Port in Q2 2019.
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