(MENAFN- Khaleej Times)Dubai's property sales market is set to weaken further this year while the residential market in Abu Dhabi is expected to see further slight to moderate price falls over the remainder of 2015 Cluttons said in a report.
The expected sales drop in Dubai is based on a combination of the federal mortgage cap affordability challenges and a strengthening supply pipeline which has seen 41000 new units announced already this year the report said. In Abu Dhabi quarterly house price declines of between 0.5 per cent and one per cent can be expected in both third and fourth quarters while rents are expected to remain largely flat during the second half. "In Sharjah tenants are now firmly in the driving seat as the lettings market slows in response to declines in Dubai and the introduction of what is perceived to be high-quality accommodation in neighbouring Ajman. "The emirate recorded a 2.3 per cent dip in average rents yet these still stand 3.3 per cent ahead of this time last year. Apartments registered a 4.2 per cent decline during the second quarter while villa rents edged up slightly by 1.4 per cent" the report said. In Dubai the total number of residential real estate transactions has remained fairly stable this year according to data from Reidin. There has been almost no change in average apartment values during the first half with a 0.6 per cent fall recorded between January and June. "The villa market continues to bear the brunt of the federal mortgage cap restrictions which have made affordability a central issue for potential buyers who are now required to hold significant equity to fund upfront costs. Values on average declined by 3.4 per cent during Q2 bringing the annual rate of change down to -7 per cent. We expect a further five per cent to seven per cent fall in villa values this year as supply levels rise and affordability issues challenge buyers" Faisal Durrani head of research at Cluttons said. Cluttons' report shows that during the second quarter of this year average rents in Dubai declined by 0.9 per cent taking the overall change in the six months to June to -1.3 per cent. Apartments in affordable communities have held steady in 2015 while the villa market has witnessed a one per cent drop during second quarter. "Looking further ahead the rental market is set to be boosted by Expo 2020 moving from being on the medium-term event horizon to the short term with infrastructure projects moving forward and in turn supporting job creation. The expected population growth to 2.8 million by 2020 will also help to increase demand for space." In Abu Dhabi house prices across the capital slipped by 0.2 per cent in the second quarter the first contraction since third quarter 2012 and leaves the current average house price standing at Dh1336 per square foot. Demand remains stable in the top-end luxury market according to the report and more affordable sub Dh1000 psf properties. "This is driven by affluent Emirati and GCC buyers continuing to home in on schemes based on perceived exclusivity while the large expat population that is being squeezed out of the rental market due to rampant rental growth is targeting more affordable properties that are perceived as better value for money." The Cluttons report points to a 1.5 per cent rise in average rents registered during the second quarter pushing annual growth in the capital up to 3.9 per cent. Hydra Village was the strongest performing submarket with rents for three bedroom for villas surging by almost 32 per cent during the first six months of the year to Dh125000 per annum. "With government spending subsiding the rate of job creation and residential demand is also expected to stabilise. With this in mind it is our view that the residential market will see further slight to moderate price falls over the remainder of 2015" said Durrani. Cluttons anticipates an upturn in international businesses looking to service any Iranian operations out of Dubai which will once again place upward pressure on Grade A rents in sought after submarkets particularly the city's primary free zones such as the DIFC the Internet and Media Cities D3 and Dubai Airport Free Zone. Cluttons research also shows that in Abu Dhabi the office market's recent stagnation is in large part linked to the slowdown in public spending which has translated into a drop in demand for new office space. For Sharjah office rents in the main submarkets held steady during the second quarter following no change in first quarter. The flat performance of the office market reflects a scaling back in overall requirements and take-up levels while the dominant oil and gas occupiers assess their expansion plans. The market's ability to weather the continued low oil price environment or weakening demand is expected to put rents under pressure particularly at the top of the market. -
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