Sales of villas on the Palm Jumeirah have fallen 25 per cent in the past 12 months, according to a report from Core, UAE Associate of Savills.
‘Prime’ villas worth more than AED10 million dipped 44 percent year-on-year, the Q2 2016 Established Prime Residential Markets in Dubai report found.
The reports revealed tough market conditions for other prime areas in the city, including Al Barari, Dubai Marina and Downtown, with Emirates Hills bucking the trend.
Sales prices per sq ft for Palm villas remained relatively steady with just a four percent year-on-year drop, the research found, as landlords continue to command stable prices for well-maintained or refurbished properties.
The area’s rental market saw a seven percent drop, resulting in a marginal fall in yield levels.
“With a total stock of approximately 1,700 villas, an estimated 150 to 200 villas are currently available for sale on the Palm Jumeirah,” said David Godchaux, CEO of Core, UAE Associate of Savills.
“More units are anticipated to be held by investors as many are not pressed financially to sell in this bottoming market, while a few others look towards commanding premiums by refurbishing existing units and attracting buyers who are seeking contemporary products.
“A strong recovery in prices is not anticipated in the near term as we expect this underlying stock to keep the sales prices static even if the demand revives in the coming quarters.”
In Dubai Marina, sales transaction levels also dropped 25 percent, while prime apartment sales fell 43 percent.
But the area has still seen the highest transaction activity in the apartment segment over the past few years, said Godchaux.
“As expected, headline occupancy levels are nearly 90 percent in top performing towers and the prime rental market has remained relatively steady due to the continued demand from expats,” he said.
“Nonetheless, prime sale prices have dropped 8 percent year-on-year, although this has created investor opportunities through stable yields averaging between five and six percent.”
Dubai’s Emirates Hills witnessed the highest transaction volume among all prime villa districts in the past four quarters, at 40 percent of the city’s market.
Villa properties above AED10 million experienced about a 45 percent higher year-on-year transactional activity levels in the same time period.
Villa sales prices and rents in Emirates Hills followed almost identical trends, keeping yields stable from 3.5 and 3.7 percent over the past four years, said the report.
And this is expected to continue, according to Godchaux. He said: “With limited stock and no new supply of this scale and quality in close vicinity, central location in the Emirates Living master plan, close proximity to other prime residential and economic clusters, Emirates Hills continues to be the most sought-after ultra-prime residential address in Dubai for international buyers.
“Capitalising on these factors, we expect this niche prime submarket to hold value in the mid-to-long-term in addition to holding its ‘elite address’ status.”
There was no such good news for the sales market at Al Barari, which saw a 10 percent year-on-year drop, while the volume of prime sales in Downtown fell by 12 percent. However, there is a more promising prediction for the latter.
Godchaux said: “In Downtown, the softened sales market is pushing financially sound investors to take a long-term approach by holding onto properties and leasing prime assets rather than flipping, as the rental market continues to be strong.
“The ongoing uncertain macroeconomic backdrop has also slowed end-user buyer interest. These factors have pulled overall transaction levels down by 19 percent in the Downtown residential market.
“However, the district maintains its high headline occupancies, currently ranging more than 85 percent across most of the prime towers. The Downtown rental market has in fact shown a two percent year-on-year increase, bucking apprehensions of a weakening rental demand due to a consolidating financial jobs market.”
Overall the report reveals prime residential prices in Dubai are 60 percent below prime New York, 75 percent below prime London and 85 percent below prime Hong Kong.
“Aided by the current softened sales market, potential capital appreciation and higher long-term yields, Dubai’s prime residential real estate is extremely good value by global levels,” said Godchaux.
“With no holding charges and comparatively lower transaction costs, Dubai stacks up favorably against other competing global cities as an investment destination for global UHNWI and investors.”
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