Real estate sales prices have continued to soften across most of Dubai along with widespread rental declines, according to a new report from consultants Core Savills.
In its latest Dubai residential market update, Core Savills noted that 6,000 units have so far been delivered in 2018, with a further 15,500 units expected for the remainder of the year.
The report found that sales prices declined most sharply in central areas such as Downtown Dubai and Dubai Marina, which saw declines of 7 percent due to a large number of new launches in these areas which shifted demand from ready built to off-plan stock.
Other areas, such as JLT and Emirates Living, have also seen new launches within the community, in addition to witnessing a demand shift towards adjoining - and newer - areas of Jumeirah Village as products with similar or lower price points become available.
“Multiple phase deliveries such as Mira, Mudon and Arabian Ranches have cast a significant downward pressure on The Springs and The Meadows’ sales market, with the potential buyer pool for the district preferring location over new stock,” the report notes.
Core Savills partner Edward Macura noted that the effect of new stock impacting secondary sales prices within a community or in the adjoining areas “is one of the strongest reasons causing a delay in sales price recovery.”
Additionally, the report found that the rental market in core apartment and villa districts is starting to see noticeable drops, such as in The Springs (9 percent) and The Meadows (5 percent) as tenants take advantage of rents – which are 15 to 20 percent lower than in 2015 – to renegotiate with landlords.
With most rental relocations happening between April and June, Core Savills expects an interim dip in the continued downward rental trend.
“Despite relatively lower rentals, the softened sales market has now made cost of ownership lower than cost of renting for long-term occupiers, making it very attractive for tenants to move to ownership,” Macura added. “This shift from rental to ownership is also shrinking the rental pool, leading to further downward pressure on rentals.”
With the onset of Ramadan approaching and followed by the summer, Core Savills expects rental softening to continue for the rest of the year – an effect that will persist as the next cycle of lease renewals leads to relocations, in what is now an extremely tenant-friendly market.”
“Centrally located rental districts with strong demand generators such as connectivity to work clusters, established community amenities are expected to be somewhat resilient, especially for stock that has already adjusted to rental market declines within the 2017-2018 lease renewal cycles,” Macura concluded.For all the latest real estate news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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