Residential property prices in Dubai have bottomed out, reaching prices not seen since early 2008, property consultants Jones Lang LaSalle said in a report published Monday.
Villa sales increased three percent in the first quarter of 2012, compared to a peak in the third quarter of 2008, but prices still remain 25 percent lower, the firm said in its quarterly Dubai real estate market overview, which sourced data from REIDIN.
“The villa market is expected to continue to outperform the apartment sector and whilst prime residential assets in well-established locations continue to see improved performance, secondary buildings and locations are still suffering from rental and pricing declines,” the report noted.
Apartment sales in the emirate also started to stablise in the first three months of the year, but prices remain low, down 34 percent compared to 3Q2008.
Villa rental prices increased slightly, rising five percent compared to January 2009, but apartment rates continue to lag with asking prices down 30 percent on January 2009. “Year-on-year rental growth has been positive, with general residential indices 12 percent higher than in 1Q2011,” the report said.
Property prices in Dubai soared after the city opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments.
From start-2007 to mid-2008, prices rallied almost 80 percent, Morgan Stanley estimates showed, with billions of dollars worth of new projects launched by local developers.
But home prices in Dubai suffered the biggest reversal seen in the Gulf property market as result of the financial crisis, declining on average 60 percent.
Around 3,000 units were added to the emirate’s residential stock inventory in the first three months of 2012, while around 43,000 additional units are expected to be delivered by the end of 2014.
Office rents in prime locations remained stable during the first quarter of 2012 but occupancy rates increased to 35 percent in Central Business District, the financial heart of the city.
Vacancy rates in locations such as unfinished Business Bay remain high at 90 percent and continue “to suffer from very limited demand”.
“Although prime buildings are witnessing stable rental levels, secondary locations are expected to see further rental decline in 2012 due to the large proportion of new supply and weak tenant demand that is further exacerbating the supply-demand imbalance and the two-tier nature of the Dubai office market,” noted the report.
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