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Sat 31 Oct 2015 11:32 AM

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Dubai residential projects said to reach saturation point

New report also shows that Dubai house prices and rents continued to fall during the third quarter of 2015

Dubai residential projects said to reach saturation point

The number of announced residential projects in Dubai has reached a saturation point in the third quarter of 2015 as house prices and rents continued to fall, according to a new report.

Phidar Advisory's Q3 Dubai residential research note said that apartment lease rates decreased a nominal 0.5 percent, while sale prices decreased 3.6 percent, pushing yields up to 7.5 percent.

Lease rates for villas decreased 1.5 percent and sale prices decreased 3.4 percent, which pushed yields up to 4.8 percent, according to Phidar's House Price Indices.

"The current yield expansion is necessary and healthy in the ongoing market correction," the report said.

Regarding the number of announced projects in Dubai, Jesse Downs, managing director of Phidar Advisory, said: "There is no reason to panic because some announced and even launched projects are not viable, so handover is not expected in the stated timeframe.

"However, developers and other stakeholders should monitor this carefully and plan appropriately," she added.

Based only on supply pipeline estimates, the 5 year forecast for supply is 2.8 percent compound annual growth rate (CAGR) whereas the demand has a robust 5.8 percent CAGR, largely due to jobs created by the development and running of the Expo 2020 project, which should start to ramp up in 2018.

Phidar's supply pipeline estimates include only those projects actively under construction. However, when supply estimates include launched or announced projects without site progress, the 5-year supply CAGR jumps to up to 6.7 percent.

Earlier this month, consultants Cavendish Maxwell said Dubai property prices fell by two percent in the third quarter of 2015 following a similar decline in the previous quarter.

Its Dubai Residential Market Report said apartment and villa prices have both dropped by an average of two percent between July and September. Year on year, it said apartment prices have fallen by six percent and villas by nine percent.

The report added that apartment rents in Dubai remained stable in Q3, while villa rents decreased in most of the major villa communities.

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