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Mon 21 Nov 2016 01:54 PM

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Dubai property 'bottoming out' as sales, rentals stabilise in Q3

Average residential sales, rental levels remain unchanged this quarter, recovery anticipated in 2017, say JLL, Dubizzle

Dubai property 'bottoming out' as sales, rentals stabilise in Q3
(Marwan Naamani/AFP/Getty Images)

Average residential sales and rental prices in Dubai have dropped 4 percent in the last year but remained largely unchanged in the last quarter, suggesting that the market is bottoming out, new research shows.

JLL and Dubizzle’s first co-authored property report shows that average rents across 12 popular communities in Dubai declined by 4 percent year-on-year in the third quarter of 2016, while sales prices also fell 4 percent.

However, it notes that prices began to stabilise in the third quarter suggesting that the market is reaching the bottom of its cycle. Both sales and rental levels are expected to recover by next year, the report said, based on an expected uptick in overall economic growth and increased investor confidence “as they recognise that the market is close to its cyclical trough”.

Steady improvements to the regulatory environment, increased market transparency, gradual recovery of oil prices, and increased employment and construction activity in the run-up to Dubai Expo 2020 are all expected to provide a fillip to a recuperating market.

However, this forecast is assuming supply levels remain constrained, the report warned. Based on JLL data, Dubai’s residential sector is likely to experience an annual 4 percent increase in residential supply from 2017 to 2019, compared to an average 3 percent in previous years, although not all announced projects are expected to be delivered.

“The greatest threats to the anticipated recovery in 2017 would be a further slowdown in the Dubai economy or an increase in the materialisation rate leading to a possible oversupply,” the report said.

Craig Plumb, head of research at JLL MENA, said: “Developers have traditionally over-estimated levels of completions of homes in Dubai, with only around 30 percent of all announced projects actually being delivered on schedule over the past few years.

“We continue to see developers phase out the release of units to dampen the opportunity for oversupply.

“However, it is vital that developers remain conscious of this concern as we draw closer to Expo 2020, which could see a lot of new projects unveiled.”

Meanwhile, the data from Dubizzle suggests that the mid-market sector is outperforming other sectors with a more modest decline in sales price per square foot (around -2 percent) than premium housing (-6 percent) over the past year.

This reflects the findings of three other pieces of research published this week, by Propertyfinder.ae and Core Savills [HYPERLINK to STORY], as well as Asteco, whose report on Sunday showed that apartments in Jumeirah Village Circle (JVC) and Dubai Sports City saw rates increase by 2 percent and 3 percent respectively – the latter recorded the highest growth over the year (an average of 13 percent) as demand for affordable housing increases.

By comparison, upmarket villas in Jumeirah and Umm Suqeim recorded a significant year-on-year decline of 19 percent and 12 percent respectively, which Asteco attributed to substantial new supply and an increasing number of budget-conscious tenants.

John Stevens, managing director of Asteco, said: “Although rental rates have remained relatively stable this quarter we are seeing a definite shift to more affordable areas such as Jumeirah Village and Dubai Sports City where rents are cheaper and an increasing number of amenities are coming online as communities reach critical mass.”

Ann Boothello, senior product marketing manager for property at Dubizzle, added: “Dubizzle search volume data highlights an increased popularity among online property buyers in more affordable and mid-market communities such as Al Furjan, JVC, Jumeirah Village Triangle and Sports City.

“JVC received 9.7 million searches for properties by Dubizzle property seekers in the last quarter alone.”

Dubizzle and JLL said they had joined forces and shared data to drive transparency in the UAE property market.

Their first report also showed that the UK’s vote to leave the European Union (EU) has dampened demand among British investors. UK investment in Dubai real estate fell from 9 percent in the first half of 2015 to 7 percent in the same period this year.

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