Residential house prices in Dubai are likely to feel more downward pressure throughout 2015 as 25,000 new properties are slated to enter the market.
This may force owners to offer lucrative incentives to prospective tenants, like rent-free periods and special allowances in the form of reduced rental values, according to new research by real estate website Bayut.com.
It said apartment prices in Dubai decreased 5.76 percent on average in the first quarter compared with Q1 2014, owing largely to dwindling demand for and decreasing prices of larger apartments in the emirate.
Bayut said the number of transactions also dropped 37.61 percent in a quarter-on-quarter analysis of figures obtained from the Dubai Land Department.
The report noted that increasing rents across the emirate during 2014 has resulted in a higher interest in the affordable residential options of Bur Dubai and Jumeirah Lakes Towers.
The first quarter saw a rental increment in all apartment types, the largest of which was a 15.29 percent quarter-on-quarter rise for studios.
The Bayut report said: “Expectations of an across-the-board decline in rental prices in Q1 2015 proved to be wrong, and the solid demand for residential units kept rents afloat in many localities while others did indeed lose in rental value.
“However, owing to the residential units expected to be delivered later in the year, a wider quarter-on-quarter rental decline is still expected once the new units hit the market.
In Abu Dhabi, Bayut said the real estate market performed considerably well and continued to strengthen throughout the first quarter of 2015.
According to the online database of Bayut.com, the prices of studio apartments across Abu Dhabi experienced a 6.15 percent quarter-on-quarter drop in Q1 2015 but other apartment types saw increases of between 0.29 percent and 4.75 percent, with four-beds rocketing by 19.04 percent.
Most rental values in Abu Dhabi rose during the first quarter of 2015 but there was a decrease in studio rents, Bayut said.
Its data showed rents of studio apartments in Abu Dhabi saw an average decrease of 11 percent, which is accounted for by the shift of tenants to more spacious options available in the emirate.
Rents of one- and two-bed apartments rose by 7 percent and 9 percent, respectively while larger units saw rental values grow by between 1-3 percent.
Bayut said Abu Dhabi is expected to continue with its sustained growth pattern in the residential market.
“With a limited number of expected units lined up and an increase in business and job opportunities, the emirate may see a subsequent rise in population of expats leading to a heightened demand,” it said.
Bayut.com CEO Haider Ali Khan added: “We continue to see strong rental demand in prime areas and there are good bargains available in the market for investing in property. There is a healthy job market which continues to blossom and this bodes well for the real estate market in the years to come.”
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