The Dubai residential real estate market is likely to remain fragmented during the final quarter of 2012 and into 2013 with mixed patterns of growth depending on the location and product, CB Richard Ellis has said in a new report.
Its Q3 report on the emirate's property sector said rental rates now appeared to be "fixed on an upward path in the majority of sub-markets" although for many areas, increases remained modest.
Overall, CBRE said residential rents had risen by up to five percent in the last three months.
According to data from the Dubai Land Department, the total number of residential transactionsduring the third quarter reached 2,876 compared to 1,578 in Q3 2011 - an 82 percent increase.
Almost 62 percent of all transactions during Q3 occurred in master communities such as Emirates Living, Palm Jumeirah, Downtown Dubai, Dubai Marina, Jumeirah Lakes Towers and Arabian Ranches.
Renewed investor interest in established locations was further validated by recent off-plan launches at Palm Jumeirah, Emirates Living and Downtown Dubai that have achieved healthy absorption rates, albeit with low deposit requirements and limited transparency.
Data for the year to date reveals the value of all residential transactions to be AED10.3bn compared to around AED6.9bn for the same period in 2011.
CBRE's report said: "Although the real estate market is usually relatively subdued through the summer and Ramadan periods, this year the residential market was very active, with apartment and villa lease rates increasing by around 6 percent and 4 percent respectively.
"The continued influx of a quality workforce and the migration of tenants from neighbouring emirates continues to influence occupancy and lease rates," it added.
CBRE said that Dubai's office sector continued to suffer from "widespread oversupply", with central business district (CBD) rents down by four percent in Q3.
"Although it remains possible to attract tenants to quality single ownership properties in prominent locations, the market as a whole remains under stress," the report said.
"A significant overhang of vacant space and a considerable supply pipeline loom over the next few years and will further hamper growth prospects. As a result, rental and occupancy rates are likely to see further deflation over the remainder of 2012, although prime assets in central areas will hold, underpinned by solid occupancy performance and strong demand," it added.
CBRE said the introduction of better quality office space was exerting pressure on both lease and occupancy rates in ageing properties across the emirate, leading to an increase in the availability of incentives as landlords try to retain or attract new tenants amidst growing competition.
Average lease rates in the CBD, which had remained flat for five consecutive quarters, fell during Q3.
"The drop in CBD lease rates is attributed to a substantial increase in new stock rather than a reflection of the emirate’s current business environment," the report said.
Although a stabilisation of rates had been witnessed in Business Bay, Jumeirah Lake Towers and Tecom C, vacancy rates remained exceptionally high.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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