Property prices falling at such a rate in Dubai that renters are now looking to buy, particularly villas, according to a new report.
In its 130-page ‘Trends’ report, Propertyfinder Group said the continued decline in property prices over the last six months has been a continuation of the slide since the peak in mid-2014,
“In most parts of the LAE, property prices are now at early-2013 levels,” said Lukman Haile, chief commercial officer, Propertyfinder Group.
He added that price drops have been slow and gradual, with low single-digit percentage points per quarter across most communities and segments.
The lower prices are bringing villas in some of Dubai’s most sought-after established communities “within reach or the common man,” Hailed noted, which is leading to renters converting their monthly payments into mortgages.
“Few global cities offer the opportunity to buy a well-built four bedroom free-standing villa in prime location on a decent size block for under $1.2 million. Try doing that in London, Sydney, New York, Paris, or Geneva. Good luck. But you can in Dubai,” he said.
“Long-term residents are taking advantage, snapping up good deals, planting roots, and swapping their rent cheques for a mortgage.”
Rents in Dubai have also continued their decline over the last 12 to 18 months, with a marked single digit percentage decline in recent months, mainly due to the level of new stock being handed over.
“Certainly over the past six months rents are falling faster than sale prices,” Haile noted.
Villa rents in Dubai reported the largest decrease of all categories.
The report said he decline “is shallowing for other categories when compared to January 2016. This may be due to a significant amount of affordable villas released to the market in areas such as JVC and Al Furjan.”
The biggest drop was in apartment rent was in Discovery Gardens, which saw a 9.3 percent decline in median as rents.
“Historically one of the most affordable developments in Dubai, it is facing increasing competition from new ‘affordable’ projects across Dubai,” Haile said.
Rents in Dubai now have a median price of AED89 per square foot. Downtown Dubai, despite a drop in rents, is still the most expensive at AED117 per square foot. International City and Dubailand are the two cheapest communities at AED60 per square foot.
In Abu Dhabi, the villa rental market saw a swift decrease due to a large number of handovers and the overall economic pressures.
“A sluggish oil sector has reduced employment and demand for rental accommodation across the region. This is felt most in Abu Dhabi but has a knock-on effect for the rest of the country Dubai is far better diversified and far less reliant on the petrodollar, but population growth and rental demand is not keeping pace with new project handovers and the new supply is causing downward pressure on rents,” said Haile.
Off-plan sales in Dubai continue to dominate the sales market, which Haile said is partly due to a mortgage cap imposed by the Central Bank which stipulated that expats must pay minimum deposit of at least 25 percent and 7 percent transaction costs.
“Many commentators have argued that this cap has achieved specifically what it was intended to achieve a cooling in prices, and diversion away from the secondary market toward the primary market,” said Haile.
He said due to the high volume of new project launches, there has been “aggressive low deposit and post-handover payment schemes” designed to incentivise buyers in a falling market, leading to more off-plan sales.
“Popular sentiment is that prices are at, or very close to, the bottom of the cycle and will increase in the lead-up to Expo 2020,” said Haile.
“They will also be in increase in product offerings in affordable emerging communities in the sub-one million AED, sub one thousand AED per square foot segment, which were historically under-serviced during Dubai's earlier construction booms.”
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