Dubai - MENA Herald: According to the latest Q1 2017 Dubai market report from leading real estate consultancy Asteco, tenants remained budget-conscious, taking advantage of additional supply and competitive rates to relocate to new properties or negotiate existing contracts, placing downward pressure on rental rates.
In contrast, sales prices in communities with good infrastructure, amenities and limited future supply potential recorded marginal increases. Villa sales prices in The Meadows and The Springs, for example, were up 8% and 5% respectively from Q1 2016.
“From a sales perspective, apartments witnessed declines across the board. However, it was the upper-end of the market that felt the impact most acutely, with both Downtown Dubai and Dubai Marina seeing year-on-year decreases of 7%. The villa sales market fared better as some of the established communities with good transport links within close proximity to DMCC and Media City, and those with good amenities such as a range of shops and restaurants, witnessed increased demand resulting in price growth,” said John Stevens, Managing Director, Asteco.
Overall, Asteco’s research identified a 1% quarter-on-quarter (q-on-q) decline in apartment sales prices in the first 3 months of the year. Since Q1 2016, the market recorded a drop of 3% in rates. “We have, however, noted increased transaction activity in Q1 2017 compared to the same period last year. Developers continued to launch off-plan properties at competitive prices and payment plans indicating healthy investor demand and further promoting movement within this sector,” added Stevens.
Apartments on Palm Jumeirah witnessed no change annually, whilst q-on-q sales declines of 3% resulted in prices to drop to between AED1,000 and AED 2,600 per sqft. In Jumeirah Lakes Towers sales prices increased by 5% annually with no movement q-on-q to between AED800 and AED1,700 per sqft.
In the affordable segment, Dubai Sports City witnessed an annual increase of 6% and a quarterly decline of 2% - units were available from AED700 to AED1,100 per sqft.
Villa sales prices recorded a q-on-q decline of 1%, while annually the figures saw little movement. Arabian Ranches and Dubai Sports City noted a softening of 4% annually to between AED950 – AED1,600 per sqft and AED850 – AED1,150 per sqft, respectively. This was attributed to an increase in supply in surrounding neighbourhoods providing greater opportunities at lower prices.
Apartment rental rates declined 3% on average q-on-q and 8% over the year. High-end properties were most affected with Palm Jumeirah witnessing price decreases of 7% q-on-q and 14% annually. In DIFC there was no movement for quarterly prices, however, annually the figure dropped by 9%. Mid-market apartments followed suit, witnessing quarterly and annual declines of 3% and 12% in Business Bay and 2% and 4% in Jumeirah Lakes Towers.
Discovery Gardens was the only area to notch an increase in the affordable sector with an annual rise of 3%.
“A combination of new supply and tenants taking advantage of competitive rates has resulted in landlords offering more flexible terms either by increasing the number of cheques or, in some instances, offering rent free periods. This has been compounded by the addition of 3,600 apartments in Q1, which is expected to top 17,000 by the end of the year, thus putting further pressure on the rental market,” said Stevens.
In the villa rental market the trend was similar to apartments with declines of 3% q-on-q and 8% annually as tenants took advantage of increased availability of competitively priced properties.
Arabian Ranches recorded an annual decline of 14% and a q-on-q drop of 9% with a three-bedroom available from AED125,000 to AED200,000. In Jumeirah, an annual decrease of 15% and a 7% q-on-q drop, resulted in rents for a three-bedroom to range from AED150,000 to AED230,000. The Lakes saw very little price movement with a nominal decline of 1% q-on-q and rents for a three-bedroom ranging from AED170,000 to AED250,000.
Rental rates are expected to decline further as 4,000 villas are scheduled to be delivered by the end of the year, which are likely to be leased below prevailing rates to improve take-up.
“Sales prices in many communities are fluctuating and are not expected to stabilise until rental rates bottom out, which is not expected to happen until later this year or early 2018,” added Stevens.
In the commercial sector, rents and sales both fell by 2% over the quarter. The bulk of business enquiries and transactions were for smaller sized units. However, with current oversupply (further delivery of 2.7 million sqft is expected by the end of 2017), increased pressure has been placed on annual sales and rentals resulting in rates to soften by 3% and 6% respectively.
