Dubai -Masaader News
The Q3 Dubai Real Estate Report from leading real estate consultancy Asteco has highlighted no movement in apartment sales prices q-on-q, the y-on-y figures however showed a more pronounced decline, averaging 4%, with Business Bay and Dubai Marina both posting an 8% drop, followed by Dubai Sports City, International City and Jumeirah Village, each recording a fall of 7%. Only The Greens and DIFC remained on par with Q3 2016.
Apartment rental rates over the quarter fell 4%, while y-on-y rates showed a marked drop of 12%. Dubai Marina posted the highest decline in rental rates at 19%, compared to Q3 2016, followed by Downtown Dubai (18%), Dubai Sports City (16%) and Bur Dubai (16%).
In the first three quarters of the year 10,200 apartments were delivered and a further 3,500 units are due for completion before the end of 2017. In 2016, the total supply was only 8,750 apartments.
“There has been a steady rise in new projects reaching completion. However, Asteco believes a significant amount of the supply previously forecasted for handover in Q4 2017 will spill over into 2018. These delays are likely to result from both intentional phasing considerations and unplanned construction delays/financial issues,” said John Stevens, Managing Director, Asteco.
The report highlighted marginal changes across all property types in Q3, with sales in the office and apartment segments remaining flat, and in the villa segment showing a decrease of 1%.
The figures are a minimal improvement on Q2 results, where price declines for apartments, villas and offices were recorded at approximately 3%, 2% and 2%, respectively.
“The Q3 results clearly showed a rise in transactions across the market, as owners and tenants continued to secure the best deal possible. However, while the market remained flat or witnessed marginal decreases, some areas did show more pronounced drops, particularly year on year,” added Stevens.
Similar patterns were recorded in the villa segment, with a nominal q-on-q sales price drop of 1% and a decrease of 3% y-on-y. Jumeirah Village posted the most significant decline y-on-y, at 9%, followed by Dubai Sports City at 6%.
Villa rental rates echoed the apartment market, with 3% q-on-q and 10% y-on-y drops. The Springs showed the highest decline compared to Q3 2016, at 18%. This was followed by Arabian Ranches (15%), Palm Jumeirah (15%), Dubai Sports City (14%) and Jumeirah Village (14%).
In reaction, rental rates for different unit types within the same community are now blurring. For example, within a rental rate range of AED110,000 to AED140,000 tenants can currently choose between a two, three, four or five-bedroom townhouse in Jumeirah Village.
The price disparity emerged despite supply in the villa market remaining consistently lower than that of the apartment market, with a total of 2,325 villas delivered in the first three quarters and an additional 1,300 units expected for completion in 2017. That compared to the 5,000 delivered in 2016.
Stevens commented: “The rise in new finance options for off-plan residential projects, including increased incentives and post-completion payment plans, has opened the market for buyers with more limited equity. These developments now demand a larger share of the sales volumes compared to completed units, with rates continuing to decline as a result.
“Compounding the issue, despite increased government spending on infrastructure, hospitality and retail in the run-up to the Expo 2020, is that market sentiment remains low. This is largely due to weak employment growth and the bearish outlook in terms of oil prices and global economic outlook,” he continued.
The most challenging asset class this year, according to the report, is the commercial market. Sales prices and rental rates remained flat in Q3, compared to Q2, with a y-on-y decline of 6% for sales and a marginal 2% for rentals.
While the overall trend is due to limited demand in an oversupplied market, the reluctance of landlords to lower rates in certain areas, is causing the market to flatten. Landlords need become more proactive and offer incentives to tenants to increase take-up.
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