Affordable units spur sales in Dubai property market
Supply continues to provide direction to prices and rents in emirate
With affordable properties spurring transactions in a relatively soft Dubai property market, handovers in the fourth quarter are expected to average between 5,000 and 7,000 units, according to the latest market report by a leading property consultancy.
A Cavendish Maxwell study said that a balance between demand and supply is expected to be achieved consequent to the establishment of the real estate planning committee.
“The positive impact of the move is already evident with real estate transactions in Dubai more than doubling since the announcement of the committee,” said Aditi Hariharan, senior consultant for strategic consulting and research at Cavendish Maxwell.
“A prolonged softening in prices and rents has made real estate more accessible to and affordable for owner occupiers and tenants. Supply continues to provide direction to prices and rents in Dubai and will do so as more projects materialise in the upcoming quarters,” said Hariharan.
About 29,000 residential units were delivered in 2018 and with actual materialisation rate of 40 per cent to 50 per cent more than 40,000 units are expected to be delivered this year.
Mohan Kavalam, general manager of Synergy International Real Estate, said Dubai’s property market would soon be witnessing a demand-supply balance, leading to price stability and maturity
“However, for end-users, the current market scenario of lower prices and the availability of affordable homes offers an ideal opportunity to invest,” said Kavalam.
The Q3 2019 UAE Property Market Report from Cavendish Maxwell disclosed several key insights and trends during the quarter, which are expected to hold true for the rest of 2019.
While average sales prices and rents softened across most communities in Dubai in the third quarter of 2019, average apartment prices declined by 16.5 per cent over the 12-month period from third quarter 2018, said the report. While average villa/townhouse prices declined 15 per cent in third quarter, rental declines for apartments in Dubai averaged 15 per cent and villas/ townhouses registered a 12 per cent fall over the 12-month period ending third quarter 2019.
Meanwhile, a report by Luxhabitat, based on data by Property Monitor, said over 2,280 villas and 6,963 apartments were transacted within the third quarter of 2019 in Dubai’s overall residential market. Volume of transactions in the secondary market was Dh10.8 billion, compared to Dh13.4billion in the first quarter of 2019, a 19 per cent decrease.
“However, there was an increase in number of transactions in the secondary market by 13.75 per cent. The average price per square foot also went up by 2.5 per cent for secondary market units. Currently, the average price per square foot in the overall market for villas is Dh802 per square foot and for apartments is Dh1,010 per square foot,” said Luxhabitat report.
“Off-plan registration volumes increased by 17.3 per cent from the previous quarter to Dh 8 billion. There was a 21 per cent increase in number of transactions and an average price per transaction recorded at Dh1,314 per square foot. The average price for an off-plan villa is Dh1.5 million and for an apartment is 1.2 million,” Luxhabitat report said.
According to Luxhabitat’s analysis, the prime residential market in third quarter totalled Dh10.2 billion, which is approximately 16 per cent lower than the previous quarter.
Price declines in Abu Dhabi were slightly less steep than Dubai, averaging 15 per cent for apartments and 12.7 per cent for villas/townhouses over 12 months. The average annual rental decline for both apartments and villas/townhouses was 13.7 per cent for the same period. The Northern Emirates continue to be impacted by falling rentals and sales prices in Dubai and Abu Dhabi. Supply remains the primary driver for price declines with developers attempting to entice buyers with attractive payment plans, said Cavendish Maxwell.
In the rental sector, office rents continued their decline into the third quarter with landlords settling on lower effective rates and providing incentives. In third quarter, businesses have continued to restructure their operations and limit exposure to real estate by consolidating multiple offices spaces into one. The office market in the capital saw rents decline 2-3% on a quarterly basis on muted interest from the oil and gas sector which is one of the bigger tenants. Due to Dubai’s oversupply and rental climate, rents in the Northern Emirates have also been under pressure.
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