By Staff writer
New research reveals slump in both sales prices and rental values during first six weeks of this year
Residential prices in Dubai dipped by more than 3 percent in the first six weeks of 2015, according to new research.
The research shows that Dubai is at a five-year low point for residential investment potential, warned Phidar Advisory’s mid-quarter research note.
Prices for apartment and single family homes (also known as villas) in the emirate were down 3.7 and 3 percent respectively compared to the previous quarter.
Sale price decline is outpacing rent declines, Phidar reported, pushing yields up to 7 percent for apartments.
Meanwhile sales transaction volumes increased by a marginal 1.7 percent in January compared to the same month in 2014. However, the report notes that within this overall figure, apartment volumes were up almost 8 percent in January, while single family home volumes halved in January compared to the same period in 2014.
Apartment lease rates remained stable with a nominal decrease of 0.5 percent, while lease rates for single family homes decreased by 2.4 percent.
“Our index indicates that the propensity for investing in Dubai real estate is at a five-year low point,” said Jesse Downs, managing director of Phidar Advisory. “This is a first draft and we are developing more complex iterations integrating additional variables that influence capital flows.”
The report downgraded rent projections to softening while sale price declines will continue to outpace rent declines, allowing yields to gradually expand through 2015.
Downs added: “As long as general price deflation is averted, rent stability or softening can help control labour costs, which can facilitate business and economic growth.
“Ideally, this is paired with countercyclical monetary and fiscal policies to the real estate industry that facilitate economic diversification.”
The report notes that, while the US dollar remains strong, demand for Dubai real estate will likely remain low and yields should continue to guide market trends. “Recent transaction volume contraction was caused by dwindling domestic and foreign demand”.