DUBAI 16 April 2018: Property sales prices and rental rates in Dubai are to fall further this year, says a Chestertons report.
Apartment and villa sales prices were down 5 per cent in Q1 2018, the highest quarterly decline in apartment sales prices since 2014. Rental rates for both apartments and villas fell by 2 per cent. Value and volume of transactions fell 10 per cent and 9 per cent respectively Q-o-Q
The addition of new stock, tough macroeconomic conditions and moderate population growth are set to place further pressure on property sales prices and rental rates in Dubai, according to the latest Observer: Dubai Q1 2018 report from international property company Chestertons Mena.
Overall sales prices for apartments and villas softened by 5% quarter-on-quarter, denoting the highest quarterly drop in sales prices for apartments since 2014, while rental rates for apartments and villas fell by 2%, with the Greens, a standout performer in recent years, falling by 4%. The villa market, notably Palm Jumeirah also fell by 4%.
“As a result of falling sales prices, many end users took advantage of the increased affordability of completed units, as evidenced by the 10% increase in recorded transactions from the previous quarter. This was to the detriment of off-plan transactions, which although they still dominate the market, volume declined by 19%,” said Ivana Gazivoda Vucinic, Head of Consulting and Valuations and AdvisoryOperations, Chestertons Mena.
The most popular areas in terms of completed unit transaction volumes were Dubai Marina (449 units sold), Dubai Sports City (396) and International City (274) whereas the majority of off-plan units transacted were located in Business Bay (748), Meydan City (581) and Jumeriah Village Circle (519).
From an apartment sales perspective:
- Business Bay and Silicon Oasis saw the steepest declines at 9% with prices dropping to Dh1,178 and Dh729 respectively per sqft.
- Dubai Sports City, Jumeriah Village Circle and The Greens witnessed a drop of 8% with prices declining to Dh957, Dh824 and Dh1,095 respectively per sqft.
- Dubai Land proved to be the most resilient community with a drop of just 1%, owing to the relative affordability of the area.
In the villa sales market, all communities experienced falling prices.
- Palm Jumeirah and the Meadows and Springs recording capital depreciation of 8% to Dh2,205 and Dh988 per sqft respectively.
- The Lakes dropped by 6% to Dh1204 per sqft while Arabian Ranches fell to Dh942.
“The number of new launches dropped during the quarter, which appears to be a strategic decision by developers in a bid to stave off empty units or sales at reduced-price points. However, with a substantial pipeline of stock due to be released ahead of Expo 2020, sales prices are expected to drop further this year,” added Vucinic.
In the rental market, Q1 declines were evenly spread across different unit types, contrasting with previous quarters where the declines were most prominently felt in larger units.
From an apartment perspective, The Greens witnessed the greatest decline in rental rates, dropping 4% with a one-bedroom unit available for Dh79,000 per annum.
This was closely followed by Business Bay, International City, Jumeirah Village Circle and Motor City, all of which declined by 3% with the cost of annual renting a one-bedroom apartment for the year at Dh82,500, Dh40,500, Dh60,000 and Dh74,000 per annum respectively.
Villa rents saw the highest decline in Palm Jumeirah at 4% followed by a 3% decline in Arabian Ranches and Victory Heights. Jumeriah Golf Estates was the only community not to witness any decline. A two-bedroom villa in Arabian Ranches is priced at Dh130,000; in The Springs the price is Dh120,000; in Al Furjan the price is Dh125,000; and in Jumeriah Village Triangle the cost per annum is Dh140,000. For five-bedroom properties, Palm Jumeirah, Jumeirah Golf Estates and Jumeriah Islands were the most expensive at Dh425,000, Dh390,000 and Dh350,000 respectively.
“The decline in rental rates has been partly due to the additional stock added to the market in the last quarter, in addition, due to falling sales prices, we have seen a number of expatriates choosing to become a home owner which in turn is naturally having an adverse impact on the rental market,” said Vucinic.