Prime Dubai property prices rise 2% in Q1, outperform rest of market

Knight Frank says it expects residential markets in the UAE to level out by the end of 2016, rebound in 2017
Prime Dubai property prices rise 2% in Q1, outperform rest of market
By Staff writer
Thu 09 Jun 2016 02:08 PM

Top-end properties in Dubai are outperforming the market average with prices rising during the first three months of 2016, Knight Frank has said in a new report.

The consultancy's UAE Real Estate Mid-Market Review said prices in the prime segment increased 2 percent on a quarterly basis between the fourth quarter of 2015 and quarter one of 2016.

Despite subdued growth levels over the first half of 2016, Knight Frank said its outlook for the UAE’s real estate sector remained positive.

It said the residential market in the UAE is expected to soften over the second half of the year.

"While it’s difficult to predict when the next growth cycle will be, we expect the residential market to level out by the end of 2016 before seeing gradual recovery in 2017," the report said.

In Abu Dhabi, Knight Frank added that sale prices remained relatively stable on the back of a shortage in quality residential supply.

The report said: "Given Dubai’s position as one of the top 5 global cities that matter to private high net worth individuals, we expect the emirate to continue attracting investments both regionally and globally."

Knight Frank said growth in the commercial market (office and industrial) was muted in the first half of 2016, as corporates and industries continued to scale back expansion plans amid increasing economic uncertainties.

With the industrial and logistics sectors being a main pillar of Dubai’s non-oil economy, the sluggish performance of global trade market is likely to reflect on the performance of the industrial sector in the short-to-medium term, its report said.

Consequently, rents are expected to remain stable as occupier demand softens. In Abu Dhabi, while demand has slowed significantly on the back of the decline in oil prices, the limited supply of quality industrial space is expected to keep the market stable, it added.

Knight Frank noted that the retail market in Dubai and Abu Dhabi is expected to see slower growth levels over the second half of the year, as economic uncertainty and unfavourable currency exchange rates continue to impact both tourist and domestic spending.

"In the long-term and as global uncertainties begin to ease and confidence in the market picks-up, we expect to witness another growth cycle for the retail market associated with growth in the hospitality and tourism industry. However, we believe retailers will have to diversify their offerings and introduce new products, technologies and marketing strategies to remain competitive in the market," it added.

On the UAE's hotel sector, the report said many of the challenges seen in 2015 are expected to continue throughout 2016, which will invariably impact demand levels – and in turn profitability - in the short term.

However in the medium-to-long run, Knight Frank said its outlook for the hospitality sector remained positive for both cities, and will be rooted in the delivery of major demand generators that will help drive tourism demand – particularly from the leisure segment.

From a supply side, and despite notable recent openings, both markets remain underserved in terms of mid-market and budget hotel offerings, it said, adding that the introduction of more affordable hospitality options will ultimately balance the hotel supply, which is heavily weighted towards the top end of the market in both emirates, and will widen the country’s tourist base.

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