Core Savills report also says prices of prime residential property in the city are continuing to slip in Q1
Prices in prime Dubai residential areas continued to edge downwards during the first quarter of 2017 while more affordable submarkets witnessed increases, according to a new report.
Real estate adviser Core Savills said Dubai's more expensive properties continued to lag in performance, with a range of economic factors resulting in contradictory indicators of recovery.
It also said that a recovery in rents is unlikely to happen until 2018 when employment prospects improve related to the run-in to Expo 2020.
Its latest report said a strong dollar continues to affect the traditional buyer nationalities such as Indians, British and Pakistanis as their currencies have devalued significantly over the last year.
Fears over absorption of supply to be delivered in 2017 have partly dissipated, said David Godchaux, CEO of Core Savills as around 3,100 units were handed over in Q1, representing just 15 percent of the total stock announced to be delivered by developers in 2017.
"We anticipate only 15,000 more units to be brought to market until the end of the year; which represents a 50 percent shortfall from their announced number (36,000)."
He said in the Dubai sales market, a distinctive trend continues to prevail in both apartment and villa submarkets.
Although softening for almost two years, the prime segment continues to indicate further contraction in prices while low to mid-segment submarkets are edging upwards, having reversed their course since Q1 2016.
Dubai Marina saw the highest spike in year-on-year off-plan transaction volumes, at 165 percent, underpinned by many project launches over the past few months, Godchaux said.
In the villa sales market, The Springs and The Meadows continue to be the top performing districts with a 5 percent year-on-year rise while Jumeirah Village was one of the worst performing districts with a 7 percent drop, the report added.
Godchaux also noted that off-plan sales are increasingly regaining a foothold, particularly products from reputed developers - although having a detrimental effect on secondary market sales, notably in prime apartment districts.
According to the report, The Views and Discovery Gardens saw the highest apartment rental drop at 7 percent followed by The Greens at 5 percent. On the Palm, villas have faced an amplified rental drop at 9 percent, while apartments dropped by 4 percent.
Godchaux said: “We do not expect a recovery in rental levels in 2017 across most of the residential sub-markets and are firm on our previous forecast - a trend further illustrated by the widespread rental drops across 19 of the 20 residential districts that we track."
He added: “New employment figures for the current year are expected to determine the timing and amplitude of rental recovery. We foresee a potential increase in rents in 2018 as structural improvements in the employment market in the run up to Expo 2020 and an improved macro-economic environment is anticipated to bring new occupier demand."