Monday, July 10, 2017

Dubai property prices marginally down in Q2

The property prices across Dubai, UAE, witnessed a marginal drop as fresh supply in the apartment, villa and commercial segments continued to place downward pressure on rental rates and sales prices, according to a report.

This trend will continue as the market absorbs the expected delivery of 15,000 apartments, 2,900 villas and 2.5 million sq ft of leasable office space over the second half of the year. Some of this supply may slip into 2018, said leading real estate consultancy Asteco in its latest report.

Asteco’s Q2 2017 Dubai data shows average quarterly sales price declines for apartments, villas and offices of approximately three per cent, two and two per cent, respectively.

"Market conditions have served to strengthen the negotiating position of many residential and commercial tenants," remarked John Stevens, the managing director of Asteco.

"Many existing tenants have taken this opportunity to renegotiate their lease terms (on expiry of contracts), or when faced with intransigent landlords, opted to relocate in search of more attractive terms. This has resulted in an increased churn of tenants," noted Stevens.

"The second half 2017 will see the delivery of a significant number of new units / floor space and we anticipate that this new supply will amplify current trends," he added.

According to Asteco, the apartment sales prices recorded an average q-on-q decline of three per cent, in part due to the rising number of affordable project launches and completions with developers offering smaller units at lower price points, together with a greater choice of post-completion payment options.

The variation between the high and mid-market segment was minimal, with the former falling, three per cent and the latter, two per cent.

DIFC, Jumeirah Beach Residence, Palm Jumeirah, Business Bay and the Greens remained flat while International City and Dubai Marina posted the highest sales price declines at seven per cent. Further declines were also seen in Jumeirah Village (6 per cent), Discovery Gardens (6 per cent) and Downtown (5 per cent).

Apartment rental rates softened two per cent q-on-q. However, the quarterly fall extended previous declines, resulting in a y-on-y dip of seven per cent, said Asteco in its report.

Total supply for 2017 is anticipated to reach approximately 17,700 units. This compares to 8,750 in 2016. Asteco anticipate that a number of these units will be offered to the market on ‘discounted’ rates to encourage take-up, it stated.

The property expert said Downtown Dubai recorded the largest y-on-y rental decline at six per cent, while Jumeriah Beach Residence and the Greens both softened by four per cent. Annually, rental rates within Business Bay, Downtown Dubai, Deira and International City fell by 14 per cent, 12 per cent, 11 per cent and 9 per cent, respectively.

Villa sales prices recorded a minimal change between Q1 – Q2 2017, falling 2 per cent on average. Interestingly, whilst a number of established communities, such as the Meadows and Springs (with limited supply potential) followed a similar quarterly pattern, annual growth, however, was positive at 9 per cent and 5 per cent respectively.

Villa sales prices were down 2 per cent on average in Q2 2017. Whilst Dubai Sports City, Jumeirah Park and Palm Jumeirah recorded no change, prices in Arabian Ranches increased by 2 per cent. Jumeirah Village (6 per cent), the Meadows (4 per cent) and the Springs (9 per cent) all witnessed varying degrees of softening.

The y-on-y demand for villas in established communities, such the Meadows and Springs, generated annual growth of 9 per cent and 5 per cent respectively.

Villa rental rates declined marginally in the second quarter across all communities except Mirdif and Al Barsha where prices remained stable.

Palm Jumeirah and Springs posted the greatest decline at 4 per cent with the highest y-on-y drop occurring in Springs (16 per cent), Jumeirah (14 per cent), Arabian Ranches (13 per cent), Palm Jumeirah (13 per cent), Al Barsha (12 per cent), Mirdif (11 per cent) and Umm Suqeim (10 per cent).

"Whilst recent off-plan sales launches have been underpinned by competitive price points and increasingly flexible payment plans, the secondary market, unsurprisingly, remained generally correlated to demand and supply fundamentals," explained Stevens.

In the commercial market sales prices and rental rates softened by 2 per cent on Q1, pushing the average annual decline to 3 per cent, stated Asteco.

The demand remained for small, fully-fitted and serviced office space at competitive rates.

Another 2.5 million sq ft of leasable space is scheduled to enter the market in H2, significantly lower than the supply introduced in 2016, which totalled 4 million sq ft, said the property expert in its report.

On the 2017 outlook, Stevens said: "We do not expect the market to recover until economic sentiment improves in line with increased government spending, further implementation of diversification strategies and the anticipated gradual rise in oil prices."

"In the meantime, tenants will be able to take advantage of the additional supply across apartments, villas and offices," he added.-TradeArabia News Service

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