Dubai’s residential market contracted during the first quarter of 2017, with rental rates falling by an average of 1 percent quarter-on-quarter over the period, a new report reveals.
CBRE’s latest Dubai Market View said the dip was driven by an increase in available housing options amid more constrained demand.
Meanwhile, landlords are becoming increasingly flexible with rental rates and tenants are able to negotiate, CBRE added. Residential sales prices remained relatively stable during the period, declining by less than 1 percent.
Mat Green, head of residential research at CBRE Middle East, said: “Amidst a flurry of off-plan launches the competition to attract investors is rising, meaning developers are having to become more creative in order to sustain desired levels of sales velocity.”
Dubai’s commercial sector, on the other hand, has remained relatively robust, according to CBRE.
The report said the office market “has not witnessed any major shift in activity levels”. There remains sustained demand for good quality accommodation in prime areas, and average prime rentals remained unchanged quarter-on-quarter at AED1,920 ($522) per square metre per annum.
Secondary office rentals continued to experience marginal deflationary trends, however, with rents falling by approximately 1 percent over the quarter to AED1,067 ($290) per square metre per annum.
Said Green: “Onshore building requirements have witnessed a slowdown, which has resulted in a softening of rentals for non-freezone buildings along the Sheikh Zayed Road and parts of Business Bay.
“Large corporate occupiers are still demanding and seeking good quality efficient accommodation over contiguous floors, particularly within freezone locations.”
Meanwhile, Dubai’s hospitality sector continues to witness declining revenues despite a 5 percent year-on-year rise in visitor arrivals to 14.9 million during 2016, the report said.
Citing figures from STR, CBRE said that average daily rates (ADRs) across the emirate were down by around 5 percent in the first quarter, while revenue per available room (RevPAR) was down 1.3 percent.
Rising inventory levels and a strong US dollar is making the emirate a comparatively costly destination for European visitors, while the volume of new hospitality supply continues to rise, CBRE noted.
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