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 GCC 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.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.