(MENAFN- Khaleej Times) Dubai - Dubai rents and residential prices may fall up to 10 per cent in 2015, JLL chief executive officer Alan Robertson told a news conference in Dubai on Tuesday.
Lower oil prices will have a limited direct impact on the real estate market in 2015, Robertson said, adding: "The impact of lower oil price will be more pronounced in 2016 and beyond if they remain at current low levels."
The real estate investment and advisory firm on Tuesday released its '2015 Top Trends for UAE Real Estate' report.
Robertson said: "Dubai's real estate sector witnessed stable rents and prices during Q4 2014, and the new year has started with increased uncertainty facing the UAE real estate sector."
A major dampening factor over the recent months has been concerns about the negative impact of lower oil prices on the UAE's economy and, therefore, the real estate market. Robertson said that Dubai's success at diversifying its economy and the continued growth of non-oil sectors makes it less vulnerable to lower oil revenues than other GCC oil exporters.
"There is no doubt that the bubble has deflated rather than rapidly burst and the leading question now being asked is 'what is next'. JLL's view is that the Dubai residential market will see some welcome stability in 2015, with average residential prices ranging from flat to declining by up to 10 per cent over the year," he said.
"For new tenants moving in, we expect landlords to keep the rents the same or reduce them," Robertson said, adding that existing tenants may be offered one-month rent-free instead of a dip in rentals.
Craig Plumb, head of research, JLL Mena, said: "While sentiment towards Dubai real estate has softened over the past six months, this cooling of sentiment is a positive in some ways, in that it has reduced the pressure on asset prices that was emerging in 2013 and the first half of 2014."
The rate of price and rental growth in the residential, retail and hotel sectors over the past two years has been unsustainable, Plumb said, adding: "2015 promises to be a more subdued year with minor corrections in prices in some sectors but this stability may be just the thing that Dubai needs in the long term."
He said: "The Dubai hospitality market is positioned close to the peak of its cycle and is facing challenges. The trigger for the slowdown in activity is the strength of the US dollar, which has made Dubai expensive for those coming from non-dollar dominated economies."
In 2015, office rentals will remain stable. However, he said that vacancy rates would remain significant.
JLL expects varied sources of funding to be the dominator in 2015, with equity a preferred funding approach.
The consultancy sees a significant but not excessive level of new supply to dominate discussion in the Dubai real estate market in 2015. There are significant levels of supply currently projected to complete over the year.
The emirate has 25,000 residential units, 1.2 million square metres of office space, 267,000 square metres of retail space and 4,700 hotel keys.
Given the 'mega projects' announced over previous years, such as the Dubai Water Canal, Dubai Creek Harbour and the Mall of the World, there will be more focus on construction of existing projects rather than the launch of new mega projects, according to JLL.
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