By Staff writer
JLL says just 8,000 homes completed in Dubai and Abu Dhabi in 2015, less than half the number in the previous year
Just 8,000 residential units were completed in Dubai and Abu Dhabi in 2015, less than half the number in the previous year as developers responded to more subdued market conditions, a new report has said.
JLL's annual review of the UAE Real Estate Market for 2015 said developers in the UAE have also been hit by tightened liquidity, adding that the trend is likely to continue well into 2016.
The report said the residential sales market has been affected by a decline in investor sentiment driven by lower oil prices and a slowdown in government spending, as well as regional geopolitical unrest, while US dollar strength is making UAE real estate more expensive for overseas investors.
A slowdown in the pace of economic growth has also affected the rental market - although with supply also generally subdued, there has been a lesser impact on residential rents compared to sales prices - with residential rentals in Dubai falling by around 3 percent and rents in Abu Dhabi increasing marginally over the year.
Craig Plumb, head of research at JLL MENA, said: "Following a rapid increase of residential rents and prices between 2012 and 2014, the market has now clearly stabilised, with sales prices falling in Dubai and remaining stable in Abu Dhabi during 2015 - but with a significant decline in transaction volumes in both markets.
"Prices softened by around 11 percent in 2015 according to RERA in the Dubai residential market and are expected to decline further over the next six months."
In Dubai, data from the Land Department reveals falls of 33 percent and 28 percent in the volume and value of transactions respectively in the year to November, compared with the same period in 2014.
JLL said rents have performed better than sale prices in all sectors of the residential market in 2015, increasing rental yields and the future attractiveness of the sector.
With average rentals declining in the Dubai market, 2015 has seen a widening of the gap between residential rents in Abu Dhabi and Dubai, JLL added.
Commenting on the Abu Dhabi market, David Dudley, international director and head of Abu Dhabi Office at JLL MENA, said: "The residential sales market boomed during 2013 and 2014 with 25 percent per annum growth and a major increase in transaction volumes. As the market softened during 2015, prices have remained stable but transaction volumes have dropped significantly. During 2016, we expect transaction volumes to remain low with a slight reduction in prices in some market sub-sectors."
He added that the slowdown in demand during 2015, balanced with a slowdown in supply completions led to a reduction in rental growth in the UAE capital - with prime rents increasing 4 percent in the first quarter of 2015 and remaining stable for the rest of the year.