Considerable supply pipelines for both apartments and villas in Dubai means that the residential property market is unlikely to see much price or sales growth in 2017, new research suggests.
Apartment prices in Dubai fell by 3% in the second quarter of 2017 compared to the previous quarter, partly due to a rising number of affordable property launches and completions.
With many of Dubai’s largest developers now targeting middle income investors, there has been a marked shift to smaller units, lower priced properties, according to the latest analysis report from Asteco.
There is also more choice in terms of payment options as developers seek to attract buyers who may be struggling with the high loan to value ratios stipulated by the UAE Central Bank, the report explains.
The data also shows that rental rates dropped marginally quarter on quarter but year on year they are down by 7% and a downward pressure on apartment rents is expected to continue as projects are completed and delivered to the market.
However, landlords are increasingly offering incentives such as furnishings, rentals inclusive of DEWA bills, or rent free periods of up to two months.
Villa prices fell on average by 2% in the second quarter but are still higher year on year. In some locations which have limited supply, such as the Meadows and the Springs, annual growth is up 9% and 5% respectively.
The report points out that recent off-plan new sales launched have been strengthened by competitive pricing and increasingly flexible payment plans, the secondary property market has remained generally correlates to demand and supply fundamentals.
Villa rental rates also recorded marginal changes in the second quarter of 2017 but year on year they are down by 10% and the report suggests that families have been more reluctant to move.
Tenants have opted to take advantage of lower rental rates or upgrades, usually in the response to ‘intransigent’ landlords, according to the report.
In terms of supply there were 8,750 apartments completed in 2016, some 7,500 in the first half of 2017 and 15,000 expected for the whole of 2017. In the villas market 5,000 were completed in 2016, some 1,800 in the first six months of 2017 and the prediction for the whole of 2017 is 2,900.
It adds that with a considerable amount of supply expected on the market in 2017 and 2018, there is unlikely to be much growth in the market.