Dubai apartment rental rates declined 2.3 percent in November, while sale prices declined 0.5 percent, pushing gross yields down to 7.8 percent, according to a new report.
Phidar Advisory’s report showed that residential rents continued to decline over the previous three months, with further declines projected.
“The risk in the residential market remains on the downside,” said Jesse Downs, managing director of Phidar Advisory.
“Weak investment demand and softening rents will push rates down in 2017,” she added.
Phidar’s report said lease rates for villas decreased 1.6 percent in November, but sale prices increased 5.6 percent, which pushed yields down to 4.6 percent, a quarterly loss of 30 basis points in November, using a three month moving average.
“The recent bump in villa sale price is not indicative of a market turnaround,” said Downs. “It was likely caused by a decrease in investor demand, which reduced volumes and left owner-occupiers as the main buyers.
“Although occupiers are less sensitive to rent trends, they are still impacted due to uncertainty of tenure, so we do expect prices will revert to tracking rents in 2017,” she added.
In the first half of the fourth quarter, Phidar’s Dubai Real Estate Investment Demand Index decreased by 9.4 percent compared to Q3 and declined 17.7 percent since 2015, driven primarily by exchange rate fluctuations.
“The recent interest rate hike by the Federal Open Market Committee will likely support US dollar strength and, combined with a still relatively low oil price, will continue to constrain investment demand for Dubai real estate in the coming year,” said Downs.
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