By Staff writer
Cavendish Maxwell also says transaction activity is expected to remain muted during third quarter of 2016
Apartment and villa prices declined marginally during the second quarter of 2016 in Dubai and Abu Dhabi, with 12 month declines of 6 percent and 4 percent respectively, according to a new report.
Cavendish Maxwell's Q2 2016 Residential Market Reports also showed that average rents in Q2 have shown modest and reduced declines compared to the first quarter.
It added that for Q3 the majority of agents predict apartment and villa prices as well as rents to remain unchanged.
The report said apartment prices in Dubai declined up to 1 percent in the three months to the end of June and have declined nearly 12 percent since highs in Q2 2014, with market direction largely imitating the oil price drop.
Locations such as Business Bay and International City Clusters have witnessed 12 month declines higher than 7 percent.
Manika Dhama, research manager at Cavendish Maxwell, said: "Transaction activity is expected to remain muted during the third quarter in line with past trends. Developers are promoting Ramadan-linked payment plans and the 'affordable' tag continues to be aimed at first time buyers.
"However, this is unlikely to ramp up buying activity in the short term among this target segment given the restrictive mortgage-lending requirements and overall liquidity in the market."
In Abu Dhabi, the report said price declines in investment zones were lower than Dubai, with an average 0.2 percent drop in Q2. Locations such as Saadiyat Beach Residences and Al Raha Beach had higher 12 month declines than the market average.
It said investment yields for villas in Al Raha Gardens and Al Reef areas continue to remain attractive at rates of 6.7 percent on average, adding that there is still a wide gap between the strong demand for high quality villas and the existing supply.
Apartment rents in Dubai declined at similar levels as prices in Q2, thus investment yields remained largely unchanged this quarter.
"Renters have been able to negotiate discounts on new leases, while tenants have found it harder to negotiate lower rents on renewal," said Dhama. Locations such as Jumeirah Lakes Towers, International City (clusters) and Jumeirah Golf Estates have posted 12 month declines of between 1-3 percent."
In Abu Dhabi investment zones, apartment and villa rents declined by 0.5 percent on average.
Dhama said: "Low oil prices and job losses in oil and gas and construction sectors have impacted demand. However, average declines have reduced marginally from the first quarter when rents had fallen between 1-2 percent."
The report said approximately 2,800 residential units have been completed in Q2 in Dubai, while nearly 71 percent of total units initially scheduled for Q2 have been delayed. There are 34,475 units scheduled to enter the market in second half of 2016, although delays are likely to greatly reduce actual delivery.
In Abu Dhabi investment zones approximately 570 units were completed in Q2 with an additional 3,100 units set to enter the market in H2, the report added.