By Staff writer
New Asteco report says mortgage cap, higher fees making it more expensive for buyers to get onto Dubai property ladder
Dubai's real estate sector witnessed further stabilisation and a slowing down of both rental rates and sales prices in the third quarter of 2014, Asteco said in a new report on Sunday.
The real estate consultants said the emirate has seen the downward trend for the third quarter in a row.
Apartment and villa rental rates dropped slightly by 2 percent and 3 percent respectively against Q2 figures, with sales prices also showing a nominal decline at 1 percent and 4 percent respectively, the report said.
However it added that year-on-year growth remained positive overall with a 31 percent and 17 percent increase in sales prices for apartments and villas.
"For the first time since 2012 we have seen both residential rental rates and sales prices decline as a result of a natural adjustment to ongoing new supply entering the market. The impact of mortgage cap and higher transaction fees is also making it more expensive for prospective buyers to get onto the Dubai property ladder," said John Stevens, managing director, Asteco.
He said the mortgage cap imposed by the UAE Central Bank which is 75 percent for expatriates and 80 percent for UAE nationals has continued to restrict demand, exacerbated by the higher down payment requirement and 4 percent Dubai Land Department (DLD) transfer fee, which was previously set at 2 percent.
Stevens added: "It's a wait-and-see scenario on the part of buyers right now, and we believe that sales prices may soften further with more new supply on the way.
"In the short term, a price reduction will be beneficial for the market as it will assist in unlocking demand from the middle income segments of the population."
The Asteco report said that in terms of apartment sales, the top performers in Q3 versus the same period in 2013, were Jumeirah Lakes Towers and Downtown Dubai, up by 37 percent and 35 percent respectively.
In terms of residential rental rates, Discovery Gardens and International City registered a 7 percent drop following previous year-on-year record growth levels of 23 percent and 40 percent respectively.
The report highlighted the possibility of further rental increases for these communities as per the RERA rental index, which could prompt further relocations to the Northern Emirates although it is anticipated that this trend will start to slow down as occupancy levels in the city's more affordable communities stabilise.
In comparison, some of Dubai's prime areas, such as Downtown Dubai, have remained relatively stable and Palm Jumeirah recording 3 percent quarter-on-quarter growth due to restricted supply and ever present demand.
"The popular Dubai Marina, which has suffered from long-term construction and traffic congestion woes, saw a 2 percent decline since Q2, as tenants look to relocate to more accessible areas," said Stevens.For all the latest real estate news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
The mortgage cap should be phased, with higher limits on properties below 5 million dirhams, and lower limits as the value increases. Most buyers of the higher valued properties are genuine, but are now being limited due tho the blanket cap.
This article hugely understates the level of the correction on prices in the Villa market in some areas like Arabian Ranches, The Villa, Victory Heights. Asking prices have come down by up to 20% and some transaction prices have come down by over 10%. The real indicator is the really low volume of transactions on second hand property across town. This is the start of a long period of articles showing prices declining...
Good for Dubai long run!
Please could someone explain to Mr Stevens that:
1/ Mortgage cap imposed by the UAE Central Bank (75% or 80%, 5 point difference is not that big deal)
2/ Transfer fee of 4 % through Dubai Land Department.
Are just % based on the value of the flat/villa. If the their value is not that high, the point 1 and 2 would be very irrelevant.
Mr Stevens stop insulting people. The issue remains the extremely greedy people overpricing 2 pieces of stones supporting a roof!!!
Anyway a little bird told me that the situation is worse that what you try to mitigate.
I am a genuine potential buyer
However a 3 Bedroom apartment of 2500 square feet in Abu Dhabi on Raha Beach is 4 million Plus 2% (AED 80,000) agent fee and another 80,000 transfer fee
this means with 25% down payment i have to put down 1.2 million dirhams- enough to put off any genuie buyer
Parked my money in UK where i put 5% down with barclays and all fees totalled 4000 pounds!!
The loosers were UAE banks on mortgage fees, Abudhabi govt owned Aldar which lost out on transfer fees!! Tough
What!? How is this happening? What happened to the all the hard work we did trying to overhype the market with the 2020 chants? This is not fair... but oh well, at least I have a property in Dubai Marina right by the upcoming tram. I should still be able to get my 150% increase. Please pay me ridiculously more to use the tram.
It is a question of here we go again, global financial situation deteriorating, only this time the oil price is well down and there is a plethora of conflict across the Middle East region, stretching from Syria through Iraq and Yemen, with the prevalent belief that nowhere is totally immune from side effects.
Add the tragedy of the Ebola epidemic in Africa and several million penniless displaced citizens of Arab nations as a result of the above conflict and the picture is grim.
No real effort has been made to stop speculators buying and short order reselling multiple properties on the second real estate band wagon, as in the imposition of totally onerous off-plan resale terms during the build cycle. The only way to create a steady market with some immunity.
Therefore outlandish price increases have become normal again, overheating a market that is totally susceptible to what is happening economically in the rest of the world.
I can only give anecdotal evidence from what I have seen but let's just say you know what way it is going when a villa in Arabian Ranches on the golf course is being offered for $6.2m after previously being listed at $7.6m. Same all accross the Arabian Ranches - Saheels going for below $4m again but all were above $4.5 last Nov/Dec time.