Villa prices in Dubai remained stable in the final quarter of 2009 while apartment prices declined on average by 4.3 percent, Landmark Advisory said on Tuesday.
The real estate research company said that location was becoming an increasingly key factor on pricing in the emirate with villa communities along Sheikh Zayed Road – classed as coastal communities – holding their price with most of the declines seen inland.
Location and build quality also drove apartment prices in Q4. While average prices decreased, select communities, including Palm Jumeirah and Downtown Burj Dubai, saw slight increases, according to Jesse Downs, director of research and advisory services.
In the leasing market, average villa rents declined 2.2 percent in the same period while average apartment rents declined 3 percent, she added.
“In select new residential areas, apartment rents increased which is primarily due to all available residential units having been handed over recently. This type of marginal rent increase usually follows apartment deliveries, propelled by gradual occupancy gains after handover,” she said.
In Abu Dhabi, residential sale prices held in Q4, but sales volumes increased relative to previous quarters, Landmark said, adding that prices were likely to remain stable in Q1 of this year.
The rental market in the UAE capital saw market-wide declines during Q4, driven by the onset of a rental correction during this period.
“Even high-end units saw their rents fall up to 15 percent, but, as we predicted, it was low quality units that fared worst,” said Downs.
“Since Q2 2009, the supply and demand dynamics of Abu Dhabi’s rental market have been changing. The rent declines observed in Q4 2009 are consistent with Landmark Advisory’s analysis throughout 2009.”
Landmark predict that rents are likely to keep declining throughout Q1 2010 as more supply is handed over and landlords become increasingly flexible. “We expect continued relocation from Abu Dhabi to Dubai, which will put further downward pressure on Abu Dhabi rents,” Downs said.
Landmark also said its latest evaluation of developer ratings in Dubai and Abu Dhabi revealed a shortfall of grade A operators in both cities.
Downs said: “To date, much of the supply already delivered was built by master developers, which rank higher. However, these developers constitute the minority of the total pipeline of units within the next several years. The single-asset developers currently building the bulk of the forthcoming supply have a significantly lower rank and may suffer further credit downgrades as their product is forecasted to overpromise and under deliver.
“This phenomenon will create a bifurcation between integrated, high-quality units and those poor quality units within fragmented communities where many builders have postponed their developments indefinitely.”
The evaluation, she said, was based on three basic criteria of product quality, customer service, and overall perception.
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