(MENAFN- Khaleej Times) Average apartment prices fell two per cent and villa prices dipped one per cent in the first quarter compared with the previous quarter.
Dubai’s residential market continued to soften as 730 new units boosted housing supply during the first quarter of 2015 real estate consultants JLL has reported.
Average apartment prices fell two per cent and villa prices dipped one per cent in the first quarter compared with the previous quarter. However on a year-on-year basis apartment prices rose by seven per cent while villa prices surged six per cent according to the REIDIN sales index.
Rents remained flat for apartments and villas on a quarter-on-quarter basis. Apartment rents rose nine per cent while villas rents witnessed a two per cent growth year-on-year the index showed.
According to the latest CBRE report year-on-year residential sale transactions registered a significant drop in overall value terms falling 20 in the first quarter while volumes also declined by around four per cent.During the first quarter total sales transactions were valued at Dh6.39 billion with 3896 transactions completed. This compared with a value of Dh4.55 billion and 2573 deals during the fourth quarter of 2014.
“However it was not sufficient to avoid a decline in average sales rates which fell by around two per cent over the quarter” said CBRE.
“The first quarter of the year continued to see subdued activity in Dubai’s real estate market” said Craig Plumb head of research at JLL’s Dubai office.
“As Dubai’s residential market moves towards a period of correction the next driving force is predicted to be end-users or middle-income earners as opposed to speculative buyers.”
“Sale prices normally move ahead of rents and this appears to be happening in the residential market in Dubai at present. While this is resulting in increased rental yields this is likely to be a temporary factor with more attractive yields eventually increasing demand and therefore sale prices again” said Plumb.
In January JLL forecast that average house prices and rents in Dubai would fall 10 per cent this year because of a lack of affordability in the market in the backdrop of global oil price plunge even as 22000 new homes would enter the market. Dubai has 379000 residential units as of March 31.
Plumb pointed out that middle income end-users have assumed an increasingly important role in Dubai’s residential market of late with a number of initiatives underway from both developers and the government that target the affordable housing sector including the launch of two phases of Nshama’s Town Square project near the Arabian Ranches and a proposal by the Dubai Municipality to introduce mandatory affordable housing quotas.
Plumb said the commercial sector would see a significant increase in supply during the next couple of years particularly of Grade A office space. “Reflecting confidence in the market the DIFC has announced a Dh200 million expansion plan which will include completing Building 11 of Gate Village in 2017 and ICD Brookfield’s $1 billion development in DIFC is scheduled to be delivered in 2018.”
In Dubai’s hotel sector average daily room rates fell five per cent from a year earlier to $273 in the 12 months to February while occupancy rates edged down to 86 per cent from 88 per cent. Combined this led to a seven per cent drop in revenue per available room to $235.
Chiheb Ben Mahmoud head of hospitality at JLL Mena said that the hotel sector continued to face competition in the first quarter of the year. “The increase in supply on one hand and the perceived softness of the inbound travel market on the other are leading some hotels to review their pricing and revenue management strategies.”
JLL warned that room rates could decline further as an additional 3600 rooms will be added this year to Dubai’s current inventory of 64900 rooms.
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