Off plan sales continue to dominate the residential property market in Dubai which experts believe is partly due to the recent mortgage cap introduced by the emirate’s Central Bank.
Many commentators believe that the cap which means expats need a minimum deposit of 25% and pay 7% percent transaction costs has cooled the market.
However, according to Lukman Haile, chief commercial officer of the Propertyfinder Group, the high volume of new project launches has resulted in developers offering aggressive low deposit and post-handover payment schemes designed to incentivise buyers that has led to increased off-plan sales.
Looking ahead Haile and others believe that prices are at, or very close to, the bottom of the cycle and will increase in the lead-up to Expo 2020. Alongside this low prices mean that people renting are looking increasingly to buy.
The firm’s latest outlook report suggests that the continued decline in property prices over the last six months has been a continuation of the slide since the peak of the residential property market in the middle of 2014 and in some locations prices have fallen to the same level as in the beginning of 2013.
Haile explained that lower prices are attracting new buyers to the upper end of the market who may not have been able to afford homes at this level. He pointed out that it would not be possible to buy a four bedroom home in London, Paris, New York, Geneva or Sydney for under $1.2 million but it is possible in Dubai.
Meanwhile, the lettings market is also cheaper, declining over the last 12 to 18 months. The report says they have been falling faster than sale prices in the last six months, with villa rents falling the most.
The report suggest this may be due to a significant amount of affordable villas being released to the market in areas such as JVC and Al Furjan while the biggest drop was in apartment rent was in Discovery Gardens, down 9.3%.
The median rent in Dubai is AED89 per square foot with the cheapest AED60 per square foot in International City and Dubailand while in Downtown Dubai rents are still the most expensive at AED117 per square foot.
A sluggish oil sector has reduced employment and demand for rental accommodation across the region and this has been felt most in Abu Dhabi as Dubai is better diversified and less reliant on the petrodollar.