(MENAFN - Khaleej Times) The addition of new stock, tough macroeconomic conditions and moderate population growth are set to place further pressure on property sales prices and rents in Dubai, according to property company Chestertons Mena.
Overall sales prices for apartments and villas softened by 5 per cent quarter on quarter, denoting the highest quarterly drop in sales prices for apartments since 2014, while rents for apartments and villas fell by 2 per cent, with The Greens, a standout performer in recent years, falling by 4 per cent. The villa market, notably Palm Jumeirah, also fell by 4 per cent.
"As a result of falling sales prices, many end-users took advantage of the increased affordability of completed units, as evidenced by the 10 per cent increase in recorded transactions from the previous quarter. This was to the detriment of off-plan transactions, which although they still dominate the market, volume declined by 19 per cent ," said Ivana Gazivoda Vucinic, head of consulting and valuations and advisory operations, Chestertons Mena.
The most popular areas in terms of completed unit transaction volumes were Dubai Marina (449 units sold), Dubai Sports City (396) and International City (274) whereas the majority of off-plan units transacted were located in Business Bay (748), Meydan City (581) and Jumeirah Village Circle (519).
From an apartment sales perspective, Business Bay and Silicon Oasis saw the steepest declines at 9 per cent. Dubai Sports City, Jumeirah Village Circle and The Greens witnessed a drop of 8 per cent. Dubailand proved to be the most resilient community with a drop of just 1 per cent, owing to the relative affordability of the area.
In the villa sales market, all communities experienced falling prices, with Palm Jumeirah and the Meadows and Springs recording capital depreciation of 8 per cent. The Lakes dropped by 6 per cent.
"The number of new launches dropped during the quarter, which appears to be a strategic decision by developers in a bid to stave off empty units or sales at reduced-price points. However, with a substantial pipeline of stock due to be released ahead of Expo 2020, sales prices are expected to drop further this year," added Vucinic.
In the rental market, Q1 declines were evenly spread across different unit types, contrasting with previous quarters where the declines were most prominently felt in larger units.
From an apartment perspective, The Greens witnessed the greatest decline in rents, dropping 4 per cent with a one-bedroom unit available for Dh79,000 per annum. This was closely followed by Business Bay, International City, Jumeirah Village Circle and Motor City, all of which declined by 3per cent with the cost of annual renting a one-bedroom apartment for the year at Dh82,500, Dh40,500, Dh60,000 and Dh74,000 per annum, respectively.
Villa rents saw the highest decline in Palm Jumeirah at 4 per cent followed by a 3 per cent decline in Arabian Ranches and Victory Heights.
A 2-bedroom villa in Arabian Ranches is priced at Dh130,000; in The Springs the price is Dh120,000; in Al Furjan, the price is Dh125,000; and in Jumeirah Village Triangle, the cost per annum is Dh140,000.
"The decline in rents has been partly due to the additional stock added to the market in the last quarter, in addition, due to falling sales prices, we have seen a number of expatriates choosing to become a home owner which in turn is naturally having an adverse impact on the rental market," said Vucinic.