By Staff writer
New report says slow demand combined with moderate supply is delaying any recovery in values
Property prices and rents could continue to decline throughout 2017 as slow demand growth delays any recovery in values, a new report has said.
Phidar Advisory's Dubai residential research note for the end of Q3 showed that residential prices continued to drop in the third quarter of the year, while forecasting further declines.
“Slow demand growth remains the immediate barrier for price recovery,” said Jesse Downs, managing director of Phidar Advisory.
“Weak demand combined with moderate supply growth will lead to further rent and price atrophy, likely into and possibly through 2017,” she added.
The report said in Q3, apartment lease rates declined 3.4 percent, while sale prices declined 4.1 percent, pushing gross yields up to 7.9 percent, a three-month gain of 5 basis points, according to Phidar House Price Index.
Lease rates for villas decreased 1.8 percent and sale prices declined 4.8 percent, which pushed yields up to 4.9 percent, a gain of 15 basis points in Q3, Phidar said.
“There is a mismatch between the supply being delivered and new demand,” said Downs. “Indicators suggest companies are hiring for junior and mid-level positions, but much of the new supply handed over in the second half of 2016 is positioned for mid-high to high income households,” she added.
Downs said that strong US dollar, low oil prices and weak occupier demand remain a barrier to recovery in 2016 while in 2017, she expects the biggest challenge may become supply, adding that "we do not expect stabilisation until the second half of 2017".