DUBAI 10 July 2018: Dubai’s residential market is continuing to feel the pressure of property oversupply, says international property firm Chestertons latest Observer: Dubai Q2 2018 report.
Overall rental rates for apartments and villas softened by 4 per cent and 2 per cent respectively quarter-on-quarter, while sales prices for apartments fell by 1 per cent compared to the last quarter and average villa sales prices remained flat during the same period.
As affordability continues to dominate the residential sector, it was the mid-market segment which witnessed the largest uptake as it appears one-time tenants took advantage of a range of flexible and affordable payment plans and opted to buy.
“Affordability has undoubtedly been one of the top trends so far this year. What we’re witnessing, especially with the large amount of supply entering the market, is that developers are focusing on the investment-active, mid-market segment through a range of flexible payment options and smaller units to keep prices attractive; piquing the interest of would-be investors,” said Ivana Gazivoda Vucinic, Head of Consulting and Valuations and Advisory Operations, Chestertons MENA.
From an apartment sales perspective, Business Bay rebounded well after recording a 9 per cent decline last quarter, the steepest in Dubai during that period, notching a 4 per cent increase to Dh1,226 per sqft. This figure, however, was still below the Q2 2017 price of Dh1,268 per sqft.
Jumeriah Village Circle was another standout performer this quarter increasing 6 per cent to Dh871 per sqft having bared the brunt of an 8 per cent decrease in Q1. Dubai Motor City was the only other area which saw growth, increasing by 2 per cent to Dh822 per sqft.
International City saw the steepest decline at 7 per cent, with prices dropping to Dh589 per sqft, while The Greens fell for the fourth quarter in a row by 2 per cent to 1,077 per sqft.
In the villa sales market, quarter-on-quarter Palm Jumeriah was the only area which saw an increase, with prices up 4 per cent to Dh2,298 per sqft. Arabian Ranches, Jumeriah Park and The Lakes all witnessed softening of 2 per cent, 3 per cent and 1 per cent respectively, while The Meadows and The Springs remained flat.
Rental Market
Once again in the rental market, Q2 declines were spread across different unit types. Previously the declines were most prominently felt in larger units however this quarter, it appears all unit types are susceptible to falling prices. In The Greens, one bedroom apartments fell by 9 per cent to Dh72,000 per year, whereas a three-bedroom apartment in the same area increased by 3 per cent to Dh144,000 per year.
The greatest decline in apartment rental rates was Dubai Sports City, dropping 7 per cent with a one-bedroom unit available for Dh57,000 per annum. This was closely followed by Motor City and Jumeriah Lake Towers where declines of 6 per cent were witnessed, with the cost of renting a one-bedroom apartment now priced at Dh71,000 and Dh77,000 respectively.
Villa rents saw the highest decline in The Springs and Victory Heights at 4 per cent, followed by Al Furjan and Jumeriah Village Triangle at 2 per cent. The Meadows, Jumeriah Islands and Jumeriah Golf Estate all decreased by 1 per cent, while Arabian Ranches was the only community to increase in price, by 1 per cent.
A two-bedroom villa in Arabian Ranches is priced at Dh133,000; in The Springs the price is Dh115,000; in The Lakes the cost is Dh163,000; and in Jumeriah Village Triangle the cost per annum is Dh140,000.
For larger units, five-bedroom properties in Jumeirah Golf Estates, Jumeriah Islands and The Lakes were the most expensive at Dh390,000, Dh350,000 and Dh315,000 respectively.
“The average decline in rental rates can be attributed to several factors, including greater choices at reduced prices. The focus for developers and landlords going forward should be on quality, as tenants proactively seek out cheaper options or move to better quality units for the same price as their existing units,” said Vucinic.