(MENAFNEditorial) •Average villa sales prices down 11% apartments 8% year-on-year
•Average rental rates dipped just 1% across-the-board
•22000 apartments and 7700 villas schedule for delivery this year keeping downward pressure on sales and rental rates through 2017
Leading real estate consultancy Asteco has released its latest Dubai report providing an historic review of last year and 2016 outlook with affordable communities leading the way in terms of rental demand and investor opportunity against a scenario of significant oversupply looming in the high-end and luxury segments.
The report flags the impact of delayed project delivery in 2015 and a large pipeline for 2016 coupled with the demand slowdown and continued low oil prices as an indicator of market prospects this year with both rental rates and sales prices coming under further pressure.
A total of 13500 apartments and 800 villas were added to Dubai’s residential real estate supply in 2015 and a further 22000 apartments and 7700 villas are scheduled to be delivered in 2016 with downward rental rate pressure likely to continue through to 2017 says the report.
“However if we look to the medium and long-term the outlook is more positive with demand more than likely to grow in line with the progress of key infrastructure projects currently underway such as Dubai World Central Airport and Expo 2020” said John Stevens Managing Director Asteco.
Residential sales recorded across-the-board declines with villa sales prices down year-on-year by 11% and apartments by 8%. Villas on Palm Jumeirah recorded price declines of 13% over the year dropping to AED 2475 per square foot on average and The Meadows was also down 15% to AED 1150.
End-users rather than investors were the predominant buyers of villas and townhouses with a clear preference for smaller 2 3 and 4 bedroom units rather than large villas. New communities such as Mudon and Arabian Ranches Phase 2 saw improved levels of activity offering better-priced yet good quality alternatives to some of the more established areas.
At the high end of the apartment market Jumeirah Beach Residence was down 16% to AED 1370 per square foot and apartments on the Palm Jumeirah dropped 14% to AED 1720 per square foot on average.
Villa rentals were down 9% on average year-on-year but Al Barsha recorded an increase for three-bedroom villas up 9.2% to AED 213000 per annum while in Mirdiff similar properties rose 4.2% to AED 138000.
The biggest falls came in Jumeirah and Umm Suqeim where three-bed villas dropped more than AED 50000 or 20% on average to hit AED 195000 while larger four-bedroom homes in Arabian Ranches and Jumeirah Park were also down 19% to AED 243000 and 15.5% to AED 145000 respectively.
“With fresh new supply entering the market this is forcing property owners especially of older independent villas to become increasingly competitive on pricing” remarked Stevens.
With supply handover slower than anticipated in 2015 apartment rental rates remained broadly stable over the year dipping just 1% on average although Asteco recorded disparities between different areas.
Apartment rental rates were down by 4% on average with Sheikh Zayed Road recording the highest drop of over 12%. Dubai Marina and Palm Jumeirah both saw a year-on-year dip with a one-bedroom apartment dropping 13.3% to AED 98000 and 10% to AED 135000 respectively.
The DIFC area was not immune either in 2015 two-bedroom units have dropped 8.7% to AED 158000 per annum as did JBR with the highest average decline for a two-bedroom apartment dropping 9.2% to AED 148000.
“For property owners adjustments in terms of rental expectations and payment flexibility will have to be made. And as usual in cases of increased supply better quality well managed or value-for- money properties will be able to achieve higher occupancy levels than others” noted Stevens.
The commercial office sector fared slightly better despite significant new space of 500000 square metres coming online in 2015 and 1.1 million square metres set to be delivered in 2016. H1 2015 saw improved levels of demand leading to moderate increases in rental rates in certain areas.
“The majority of new office supply entering the market this year will be strata-owned buildings in popular office areas like Business Bay and Jumeirah Lake Towers. Sales demand is expected to come primarily from SME level end-users” added Stevens.
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