Chestertons report says Dubai's property pipeline is expected to exert continued pressure on the residential market
Dubai’s property pipeline is expected to exert continued pressure on the residential market with an additional 10,000 units set to be delivered this year and a further 70,000 before Expo 2020, according to Chestertons.
Its Dubai Market Report Q3 2018 said that despite several positive initiatives being announced by the UAE Government, including the newly announced retirement visa, company ownership and 10-year residency, apartment and villa rental rates declined 4 percent and 3 percent respectively during the quarter.
It also showed that sales prices for both property classes declined by 6 percent, with the trend expected to continue into 2019.
“Without a significant decline in construction activity, a boost in population and short-term economic stimulus, it is unlikely the residential market will have any respite for the remainder of the year, resulting in an expected supply/demand equilibrium scenario in the next 3-5 years, due to the forecasted property pipeline,” said Ivana Gazivoda Vucinic, head of Consulting and Valuations and Advisory Operations, Chestertons MENA.
In the rental market, the biggest adjustments were seen in smaller units, a consequence of additional apartment supply and greater affordability in larger units, she said.
The report said studio apartments in DIFC and Downtown Dubai both recorded declines of 11 percent, falling to AED67,000 per year while Discovery Gardens notched the greatest fall, a decrease of 13 percent for a studio, which can now be leased for AED35,000 per annum.
In the villa rental market, the highest quarterly declines for 3-bedroom units were witnessed on Palm Jumeirah (13 percent), Jumeirah Islands (6 percent) and The Meadows (5 percent), the report added.
“Greater choice from an affordability perspective is contributing significantly to rental declines in smaller units, particularly for apartments. This trend is also being replicated in the villa market with units, which may have been previously unattainable for many tenants, now within budget. This has been compounded by landlords offering a range of special discounts to retain and entice new and existing tenants,” said Vucinic.
Sales prices continued the downward decline witnessed throughout 2018, with no let up for at least another year, according to the report.
From an apartment sales perspective, Dubai Silicon Oasis and Dubailand proved to be the most resilient in Q3, witnessing a decline of just 2 percent while Discovery Gardens witnessed the steepest decline at 13 percent.
In the villa sales market, Palm Jumeriah, which has previously been a stalwart of resilience and price increases, observed a 5 percent.
The volume and value of transactions for completed units dropped by 11 percent and 13 percent respectively but this was eclipsed by the decline in off-plan transactions, with a 31 percent decline in volume and 33 percent decline in value.
“The lower number of off-plan launches, coupled with the increased affordability of completed units, has motivated some buyers to consider properties that are available to move into immediately,” added Vucinic.