Asteco: Dubai property market edging further south
(MENAFN- Arab News) DUBAI: According to the latest UAE Property Review Q2 2015 report for Dubai from leading real estate consultancy Asteco a new era for Dubai's residential market is on the horizon as rental rates for apartments and villas across the city declined by an average of 2 percent in 2015 Q2 versus Q1 (and 5 percent year-on-year for villas) with marked declines at the higher priced end of the market.
Homes for sale also recorded an average fall of 2 percent with some areas performing significantly worse than others dropping 11 percent year-on-year for villas with apartments decreasing by 7 percent.
'The softening in Dubai's residential rental market appeared earlier than we originally anticipated offering tenants in the emirate an opportunity to recoup somewhat after several tough years of high rents' said John Stevens MD Asteco.
'The decrease was felt throughout the market and areas with a significant amount of completed new supply were the most affected. Additionally some buyers of nearly completed buildings were keen to sell at negative premiums due to the imminent completion of the building which required final payment' he added.
The highest quarter-on-quarter apartment rental declines were recorded on Sheikh Zayed Road (7 percent) Palm Jumeirah (6 percent) and Jumeirah Beach Residences (7 percent).
Conversely IMPZ Dubai Sports City and Dubai Silicon Oasis recorded higher rentals compared with 2014 of between 6 and 13 percent due to the completion of community infrastructure and increased occupancy levels making them popular mid-market residential areas.
In the villa segment the handover of projects like Casa Villas at Arabian Ranches brought rental rates for the area down by 7 percent quarter-on-quarter and 15 percent year-on-year. Over at the Mudon community the ongoing handover of its three and four-bedroom townhouses with competitive pricing starting at AED175000 per annum put pressure on landlords of neighboring developments to secure and retain existing tenants.
'We even saw a 6 percent decline for Palm Jumeirah with the handover of the lower specification Palma Residences' townhouses impacting rental rates due to their lower price band.
So we are seeing a similar tenant-friendly trend in the broader villa market with more flexible installment plans for example and this is set to continue as areas like Dubailand continue to deliver new supply' noted Stevens.
Apartment sales in Q2 were marked by a shift toward more affordable properties with locations such as IMPZ Dubai Silicon Oasis International City and the recently handed over Queue Point and Sky Courts developments in Dubailand witnessing sustained demand as yields for studio and one-bedroom apartments in particular remained attractive.
Affordability was also a priority for villa investors with Jumeirah Village recording a high number of transactions for some of the townhouse properties by Nakheel and in Indigo Ville priced at AED 700000 up to AED 1.2 million.
In comparison larger properties including five and six-bedroom villas saw minimal transactions completing in communities such as The Villa or Dubai Sports City despite strong rental demand.
'However despite strong transaction levels the increasingly competitive market environment with a lot of new supply means that the 2 percent quarter-on-quarter decline is not going to be a temporary blip with more pressure on owners to review their selling price still to come' said Stevens.
Asteco also noted an emerging trend by a limited number of purchasers who were advertising off-plan properties not yet in the construction phase at negative premiums in an attempt to relinquish financial obligations.
This quarter it was the office sector that saw the most gains with an average 2 percent growth in rental rates dependent on area although average sales prices declined by 1 percent.
Leasing-wise DIFC witnessed an 11 percent quarter-on-quarter growth with existing stock almost fully occupied and companies eyeing expansion forced to seek space in nearby buildings which has benefited development such as Central Park Towers which attained rates of AED180 and AED250 per square foot for shell and core and fitted space respectively. Index Tower's leasing rates also increased up to AED 350 per square foot as full floors were subdivided to offer small fitted space to companies looking to set up at the DIFC free zone.
However previous star performer Business Bay saw a 10 percent quarter-on-quarter decline in leasing prices affected by the handover of a substantial amount of office space with Asteco predicting more pain to follow with a further 1.3 million square feet of new supply to be delivered in the next few years.
'The office sales market has essentially moved away from investment buyers to one where end-users are the most common buyers for completed buildings. In the future we expect sales prices to come under pressure in areas where significant supply is due to be handed over' remarked Stevens.
Homes for sale also recorded an average fall of 2 percent with some areas performing significantly worse than others dropping 11 percent year-on-year for villas with apartments decreasing by 7 percent.
'The softening in Dubai's residential rental market appeared earlier than we originally anticipated offering tenants in the emirate an opportunity to recoup somewhat after several tough years of high rents' said John Stevens MD Asteco.
'The decrease was felt throughout the market and areas with a significant amount of completed new supply were the most affected. Additionally some buyers of nearly completed buildings were keen to sell at negative premiums due to the imminent completion of the building which required final payment' he added.
The highest quarter-on-quarter apartment rental declines were recorded on Sheikh Zayed Road (7 percent) Palm Jumeirah (6 percent) and Jumeirah Beach Residences (7 percent).
Conversely IMPZ Dubai Sports City and Dubai Silicon Oasis recorded higher rentals compared with 2014 of between 6 and 13 percent due to the completion of community infrastructure and increased occupancy levels making them popular mid-market residential areas.
In the villa segment the handover of projects like Casa Villas at Arabian Ranches brought rental rates for the area down by 7 percent quarter-on-quarter and 15 percent year-on-year. Over at the Mudon community the ongoing handover of its three and four-bedroom townhouses with competitive pricing starting at AED175000 per annum put pressure on landlords of neighboring developments to secure and retain existing tenants.
'We even saw a 6 percent decline for Palm Jumeirah with the handover of the lower specification Palma Residences' townhouses impacting rental rates due to their lower price band.
So we are seeing a similar tenant-friendly trend in the broader villa market with more flexible installment plans for example and this is set to continue as areas like Dubailand continue to deliver new supply' noted Stevens.
Apartment sales in Q2 were marked by a shift toward more affordable properties with locations such as IMPZ Dubai Silicon Oasis International City and the recently handed over Queue Point and Sky Courts developments in Dubailand witnessing sustained demand as yields for studio and one-bedroom apartments in particular remained attractive.
Affordability was also a priority for villa investors with Jumeirah Village recording a high number of transactions for some of the townhouse properties by Nakheel and in Indigo Ville priced at AED 700000 up to AED 1.2 million.
In comparison larger properties including five and six-bedroom villas saw minimal transactions completing in communities such as The Villa or Dubai Sports City despite strong rental demand.
'However despite strong transaction levels the increasingly competitive market environment with a lot of new supply means that the 2 percent quarter-on-quarter decline is not going to be a temporary blip with more pressure on owners to review their selling price still to come' said Stevens.
Asteco also noted an emerging trend by a limited number of purchasers who were advertising off-plan properties not yet in the construction phase at negative premiums in an attempt to relinquish financial obligations.
This quarter it was the office sector that saw the most gains with an average 2 percent growth in rental rates dependent on area although average sales prices declined by 1 percent.
Leasing-wise DIFC witnessed an 11 percent quarter-on-quarter growth with existing stock almost fully occupied and companies eyeing expansion forced to seek space in nearby buildings which has benefited development such as Central Park Towers which attained rates of AED180 and AED250 per square foot for shell and core and fitted space respectively. Index Tower's leasing rates also increased up to AED 350 per square foot as full floors were subdivided to offer small fitted space to companies looking to set up at the DIFC free zone.
However previous star performer Business Bay saw a 10 percent quarter-on-quarter decline in leasing prices affected by the handover of a substantial amount of office space with Asteco predicting more pain to follow with a further 1.3 million square feet of new supply to be delivered in the next few years.
'The office sales market has essentially moved away from investment buyers to one where end-users are the most common buyers for completed buildings. In the future we expect sales prices to come under pressure in areas where significant supply is due to be handed over' remarked Stevens.
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