Dubai 19 July 2020: Dubai’s residential sector faced a challenging second quarter of 2020, with social distancing measures, coupled with Covid-19’s economic impact, affecting market performance.
However, with encouraging transaction figures in June, a move towards more typical sales volume is expected in Q3, according to the latest Observer: Dubai Residential Report Q2 2020 from Chestertons.
Residential transactions totalled 5,233 units during Q2, representing a 40% fall year-on-year and a quarterly fall of 45%, valued at Dh9.06 billion.
The sharp decline in transactions is largely a result of preventative measures to reduce the spread of Covid-19 restricting sales activity during April and May, where total sales stood at 1,739 and 1,373 units, respectively.
Eased restrictions during June had a notable impact on sales volume, with monthly sales increasing to 2,121 units, indicating the first steps to a recovery in transaction levels.
Chris Hobden , Head of Strategic Consultancy, Chestertons Mrna , said: “While we expect residential prices and rents to decline further over the second half of 2020 – a result of challenging economic conditions and a declining expatriate population – there are positives to draw from Q2 that will support Dubai’s residential sector moving forward.
“A notable fall in new off-plan sales launches over H1 2020 bodes well for supply and demand dynamics longer-term and the release of Dubai’s official house price index, Mo’asher, will contribute to greater transparency and increased market confidence.”
Developers refrained from launching new projects for sale over the second quarter, leaving total off-plan sales launches at 4,458 units for H1 2020. This compares to 12,222 in H1 2019 and 21,435 in H1 2018.
Apartment Sales
In the sales market, average apartment prices fell 2.6% from Q1 2020, an increase in the rate of decline from the previous quarter, and a 9.8% fall on an annual basis. The most significant price declines were witnessed in Discovery Gardens, falling 6.1% to Dh524 per sqft, closely followed by Motor City where prices decreased by 5.3% to Dh535 per sqft.
The Greens once again exhibited resilience with moderate declines of 0.5% to Dh836 per sqft, while Business Bay also performed relatively well with a decrease of just 1% to Dh997 per sqft. Dubai Marina also performed comparatively well, declining by 1.1% to Dh1,009 per sq ft.
Annually, apartment prices fell by an average of by 9.8%.
Villa sales
Villa sales prices saw a more moderate fall of 1.2%, and on an annual basis average villa prices fell by 7.1%.
Palm Jumeirah, often one of the more buoyant areas in Dubai, saw the steepest quarterly price fall of 2.2% with average prices now at Dh1,820 per sq ft. The Meadows/The Springs prices saw a fall of 2% q-o-q, following a rise 1.2% the previous quarter, with average prices reaching Dh815 per sq ft.
The Lakes, Arabian Ranches and Jumeirah Park all witnessed quarterly declines of less than 1%, at 0.4%, 0.6% and 0.7%, respectively. Average prices at The Lakes stood at Dh980 per sq ft, down from Dh1,038 in Q2 2019, with average prices at Arabian Ranches and Jumeirah Park standing at Dh790 and Dh720, respectively.
Annually, Jumeirah Park was the only area to see a double-digit fall in average prices, falling from Dh827 per sqft in Q2 2019, a decline of 12.9%.
“There was often a gap seen between buyer and seller price expectations over Q2, with average prices likely to see further declines as transaction volume gains pace,” added Hobden.
Apartment rentals
In Dubai’s apartment rental market, rates declined by 3.9% in Q2 with all areas showing declines in average rental rates, a direct result of the economic impact of Covid-19. Motor City witnessed the sharpest quarterly rental decline of 6.6% with a one-bedroom apartment now available for Dh53,000, whereas, on an individual unit-type basis, three-bedroom units at Dubailand feel by 10%, to Dh99,000 per annum.
In contrast, three-bedroom units in International City and DIFC held steady at Dh65,000 and Dh175,000 respectively. Three-bedroom units in JLT also remained unchanged at Dh118,500, highlighting the popularity of larger units during Covid-19.
On an annual basis, average rents across Motor City and The Views saw the highest average declines of 14.8% and 13.2%, respectively. The Greens, Dubai Silicon Oasis, Dubai Sports City and Discovery Gardens all saw double-digit falls since Q2 2019, with rents for a one-bedroom unit falling to Dh59,250, Dh38,000, Dh40,000, and Dh45,000 per annum, respectively.
Villa rentals
The villa rental market witnessed a decline of 2.6% quarterly with the sharpest rental rate falls seen in Al Furjan, with average rental declines of 5.7%, with average three-bedroom rents standing at Dh1112,000, and The Springs by 3.3% with three-bedroom rents standing at Dh130,000.
On an annual basis, the sharpest rental rate falls were witnessed across The Springs and The Meadows, with annual rents falling by 12.2% and 12.7% respectively, compared to Q2 2019,with a three-bedroom rents in The Meadows standing at Dh165,000. Jumeirah Islands, Palm Jumeirah and The Lakes saw the lowest annual declines in average rents, at 2.9%, 3.1% and 5%, with three-bedroom units available for Dh138,000, Dh250,000, and Dh163,000,
respectively.
“Landlords will need to demonstrate flexibility on rents and payment terms over the second half of 2020, with tenants increasingly seeking shorter lease lengths and payment through four to six cheques becoming widely expected ” said Hobden.
“While the longer-term outlook is less certain, assuming a broad economic recovery next year, we expect to see greater stability in residential rents and sales prices over 2021,” he concluded.
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