By Andy Sambidge
New report also says residential sales prices and rents have fallen so far in Q3 following growth slowdown in Q2
Dubai needs to build an additional 30,000 residential units through to 2018 to maintain rent stability in the emirate, a new report claimed on Monday
Phidar Advisory said in a research note that residential sales prices and rents were still on the rise in Dubai during the second quarter of this year, but the rate of growth slowed dramatically for both sale prices and lease rates.
Based on transaction data from the first six weeks of Q3, the report also said that nominal prices for single family homes declined four percent and apartments declined 0.6 percent.
"This has led to yield compression but the report also states that as many as 30,000 additional units are needed through 2018 to maintain rent stability," the report said, adding that the figure is based on Phidar’s monitoring of announced, launched, stalled and ongoing projects.
Phidar said its House Price Index reflects real prices adjusted in representative projects across Dubai that have been completed since 2009.
Its report said residential development opportunities are still ample in Dubai, but added that the market would benefit "exponentially" from developer specialisation, particularly in the most under-supplied assets.
It said middle income housing could be a tangible and powerful catalyst, with Phidar research indicating that another 15,000 units could be reactivated from stalled projects.
Phidar said that in the short term, Dubai's property sector is likely to display volatility which could lead to a price correction, following a two-year period of "exuberant investor sentiment".
The report also suggests that long term capital appreciation due to strong demographics is a foreseeable scenario but the current supply trends and affordability constraints will pose challenges to sustained long term growth.
Last month, Knight Frank said in a report that annual growth in prime property prices in Dubai almost halved in the second quarter of 2014 compared to the previous quarter.
Prime prices rose by 6.3 percent in the year to June, down from 11.7 percent in the last quarter, its Prime Global Cities Index for Q2 showed.
Dubai was ranked the 13th best performing real estate market tracked by the property consultancy, a sharp fall from previous quarters when the emirate has featured in the top two positions.
Knight Frank said moves to introduce a mortgage cap and double transfer fees at the end of 2013 has "influenced buyer activity more than forecast".
Phidar Advisory is a recently established advisory firm specialising in real estate in the UAE and led by Jesse Downs, a former senior executive at Jones Lang LaSalle.
To make it clear once forever: The introduction of a mortgage cap and double transfer fees at the end of 2013 has NOT NOT NOT "influenced buyer activity more than forecast". The ONLY ONLY ONLY influences are SPECULATIONS and the unbelievable HIGH prices asked by owners. We do not need to an expert in real estate to understand that. Please indicate the % of people who earn more than 30K AED per month. If you have that figure in mind you will understand that there is something wrong on the market. The collapse is just in front of us...again.
who writes this stuff and where does accurate information come from??????
Rents go up on ridiculous articles such as this.
Why are there so many property sales people complaining how slow it is and there is no activity. (bear in mind these were people who experienced steady sales last year.
Propaganda to try and create a market is what articles like these generate.
Robin is 100% correct. Recent articles in AB showed the majority of properties are sold to locals. These properties are being built to flick in the future and many properties in all non local developments are dark at night. The holiday market where westerners purchase holiday homes here is long dead due to the costs of maintenance fees , and locals from tax free countries, those seeking a safe haven for their money and those from countries where money laundering occurs are still those propping up an ailing market.
If locals and investors were forced to pay higher deposits and then a tax if a property is not rented or sold within six months of completion, then there would be adequate well priced property available.
One only has to look at Bahrain and Kuwait where property for rental is about 25% of the price of Dubai and Abu Dhabi.
Dubai property prices are going down and they have been since early this year - the only problem is that none of the so called experts (mostly real estate agents and property management companies who rely on the market prices going up) are willing to tell the truth which is that transaction volume is down almost 60% YOY from 2013 since May and that real transaction prices have corrected up to 15% in some areas (Arabian Ranches for example).
The Dubai Property Market will never be stable until there is true transparency on the numbers, much less real estate agents, higher regulation for real estate agents and a formalized process for listing, marketing and selling property in Dubai. We will get there - It will just take time to mature....
I would bet my house on prices tracking down until the end of 2015 before they stabilize and start to track up again.
There is nothing wrong with this - housing prices move in cycles and that is just the way the world works
I don't believe what is written in this article. you will need to be in the ground looking for a property to rent to notice that the rent prices are going up on a weekly bases. building new homes will not going to fix the issue. Look at how many empty homes are there in the Dubai or ABD, for example almost 20% of the palm's villas are empty.
one of the fundamental problem in the market are the actions of real estate companies and property brokers who are pushing the prices up so they can pocket more commissions. It would be nice to see a regulation to cap those commissions they pocket out of expenses of the ordinary people.
Your comment about real estate brokers pushing prices up to pocket more commission is nonsense. It's within the brokers interest to list properties at competitive prices to ensure that it can be sold swiftly. Please also consider that an additional AED 100,000 (an average increment) on the sale price will only earn the broker an around an extra AED 1,000.
Almost every owner/seller I speak to expects that their unit should sell for more than what was previously achieved regardless of how short the period is from the previous transfer. It really is a constant battle to limit sellers expectations.
Like in any situation; it's always easier to blame someone else.
In April 2014 HSBC reported the following (as covered in 24/7):
"In its recent report, HSBC Global Research said that Dubai will see a supply of 90,000 new units by 2018,"
This report was before a summer of many releases from many developers.
This shows a possible oversupply of 60,000 units which if happens will cause another property crash.
It is such a pity that when the market starts to get off it's knees again the greedy developers all rush in together to cause it to crash again....