Residential prices in Dubai fell by two percent in the first quarter of 2015 as home deals slumped by 20 percent year-on-year, CBRE has said.
Its Q1 2015 Dubai MarketView report said more downward pressure on prices was likely for the remainder of 2015 as new supply enters the market.
CBRE also said annual residential rental growth measured just three percent - a reflection of "more stable market conditions".
According to the CBRE report, the volume of residential sale transactions fell by four percent in Q1 compared to the year-earlier period although both transaction values and volumes were up compared to the previous quarter.
During Q1, total sales transactions were valued at AED6.39 billion ($1.73 billion) with 3,896 transactions completed. This compared with a value of AED4.55 billion and 2,573 deals during Q4 2014.
However, it was not sufficient to avoid a decline in average sales rates, which fell by around two percent over the quarter, CBRE said.
The report added that the delivery of a significant number of new units during 2015 will add further pressure to the residential market over the course of the year.
The leasing market, which has remained stable over the past three quarters, is expected to witness increased landlord incentives in the form of rent-free period and other allowances, while rental declines are also likely in some areas.
Mat Green, head of research and consultancy UAE, CBRE Middle East, said: "Prime residential areas continue to attract the bulk of investment appetite, with properties from Palm Jumeirah, Dubai Marina, Emirates Living, Jumeirah Beach Residences (JBR) and Downtown Dubai recording a total sales value of AED3.27 billion, equating to 51 percent of the total value transacted."
Dubai Marina/JBR recorded a total transaction value of AED1.08 billion, spread across 512 deals, which equates to an average deal value of AED2.11 million.
During the same period Emirates Living recorded total sales measuring AED808 million, from 245 transactions.
Palm Jumeirah remained the most expensive in terms of transaction value per deal. The development recorded total sales measuring AED815 million across 145 deals, which calculated to an average deal value of AED5.62 million.
"The residential leasing market has remained broadly stable for a third consecutive quarter, with only minor changes in rental rates recorded. The markets relative stability during the past nine months is reflected in the huge swing in growth figures from 27 percent in the year to Q1 2014 versus 3 percent in the year to Q1 2015," added Green.
CBRE said that within the apartment segment, emergence of new supply and traffic related issues has led to drop in rental rates in few residential districts while other developments with improved infrastructure and retail facilities maintained healthy rental rates.
Apartment rental rates during the quarter varied between a fall of one percent and a rise of three percent, with Al Nahda, Al Barsha, International Media Production Zone, Motor City and Liwan all seeing declines. Gainers included Jumeirah Lakes Towers, Discovery Gardens and Karama.
Villa rental rates remained largely unchanged during the quarter, CBRE added.
"The villa market witnessed the addition of roughly 3,000 new units during 2014 which has to an extent helped to balance rental inflation. Rental rates for six and seven bedroom units remained unchanged due to more limited supply availability. The most significant rental declines were noted in Jumeirah Village and The Villa developments, which registered a drop of 3-4 percent respectively quarter-on-quarter," said Green.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.
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