Property prices will continue to fall until the fourth quarter in Dubai's most popular neighbourhoods, Landmark Advisory said on Monday.
The price of an apartment fell 23 percent, while the price of a villa fell 32 percent in the first quarter - bringing them down to levels similar to the fourth quarter of 2007, but volumes remained low, the broker said.
However, the number of transactions in the first quarter was skewed towards the upper end of the market, and after creating an equally weighted sample of both medium and high end transactions, the average price of an apartment fell 29 percent, while villas were down 39 percent.
Landmark estimates that 24,000 new units will hit the Dubai market this year, adding that the vacancies caused by expats leaving the city could lead to a surplus of 30,000 to 52,000 units.
It expects price floors to start emerging in the fourth quarter this year.
Lower rents were also removing the incentive for people to share apartments and prompting more people to commute to Abu Dhabi from Dubai, the firm said in its Q2 Dubai and Abu Dhabi residential real estate report.
Relocation within Dubai primarily involves residents in low cost areas like International City and Discovery Gardens moving to premium areas like Dubai Marina.
Rents fell between nine and 41 percent, depending on the area.
Dubai Marina was the most popular area for leasing, accounting for 30 percent of all new annual lease contracts in the city.
One of the most significant changes in the quarter was a dramatic fall in listing volumes, indicating that potential sellers are holding on to their properties until prices recover, amid discounts of up to 50 percent, Landmark said.
Abu Dhabi’s primary off plan remained frozen, while secondary prices accelerated their decline in the first quarter.
The price of an apartment in the capital fell 15 to 20 percent while a villa declined 25 to 30 percent in value, but prices began to stabilise towards the end of the quarter.
The Abu Dhabi market will remain undersupplied even if the population only grows by around two percent this year, compared with a six percent estimate under the Abu Dhabi 2030 plan.
Still, Abu Dhabi developers that launched projects at or above AED2,000 per sq ft will have to reconsider their pricing structure, Landmark warned.
Discounts will be necessary not only to sell the remaining inventory but also to prevent defaults by buyers who have only paid 20 percent and now have an incentive to walk away, it said.
Landmark Advisory is the research division of Landmark Properties.For all the latest business 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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