Dubai property prices continue to decline till 2017
Dubai residential property rents and sale prices are forecast to continue declining in 2016 and 2017, although there is a “bullish mid-term forecast,” according to Core Savills.
The report indicated that as many major projects have delayed or amended delivery schedules in response to contractor pressures and market dynamics, with for example, only around 8,000 residential units delivered in 2015 compared to the 25,000 units originally projected for completion. Despite claims that the number will be much higher, it is likely that only between 9,000 to 10,000 units will be delivered in 2016, a slowdown that will help to moderate potential oversupply concerns.
“The anticipated delivery of new supply in 2016 within the major residential districts is sufficiently modest that it will exert only a small amount of downward pressure and it is anticipated that new supply in emerging locations such as Jumeirah Village and Dubai land will be absorbed relatively easily provided the units are priced competitively,” it added.
“Villa sales prices during 2015 showed a steady decline in established locations with a notable exception in the prime area of Jumeirah. The decline was partly due to the introduction of smaller, more ‘efficient’ units in new outer zones, competing with older and more expensive stock in established areas. In contrast, the rise in Jumeirah prices reacts both a less liquid market with fewer transactions, very low levels of new supply, and less elasticity of the demand and owners’ behaviour to regional and global economic or political factors, due to the ownership restrictions to local buyers,” it said.
Commensurate with sales prices, rental rates across Dubai generally continued to ease downwards in the second half of 2015, albeit marginally, but mainly as a result of many of the same pressures. The growth in new supply was the major factor in most locations and the ability of tenants to negotiate with landlords in what has increasingly become a ‘renters market’.
Villa rental rates showed higher percentage falls (ranging between 3% to 12%) than apartment rates with the exceptions of Emirates Hills, an upscale area in which the growth of supply has been the most constrained. Prime apartment and upper mid-range districts such as DIFC Downtown, Dubai Marina and JBR experienced the highest rental falls of about 5-6% in 2015, while apartments in most districts displayed a marginal drop of 4% or less.
However, the Greens and Business Bay were seen as exceptions with prices remaining constant, the former owing largely to its value for money products, central location and ease of connectivity while the latter attributed to its infrastructure and connectivity improvements.
Hydrocarbon prices, possible oversupply, strong dollar and regional geopolitical uncertainty coupled with an overall bearish perception in the market are likely to place moderate downward pressure on the Dubai residential sector during 2016.
However a number of balancing factors such as the release of Iranian equity, a possible bounce in oil prices, government driven job creation, expo 2020 and a growing pool of investors looking to re-enter the market at the right price and time, along with end users making a shift from renting to owning due to the penalizing high level of yields, are likely to come in to play towards the end of the year.