Dubai’s residential property market continued to soften in the first three months of this year, in line with analysts’ forecasts, with rental values recording a more pronounced fall than sales prices, according to consultancy Cavendish Maxwell’s latest market update.
“Upcoming supply will continue to impact occupancy levels in existing stock, thus putting further pressure on rents,” said Manika Dhama, senior consultant at Cavendish Maxwell, which compiles data from its Propertymonitor database on a quarterly basis to assess the market.
“Housing allowances for many expats are being realigned in line with changing business activity and hence their appetite for higher ticket properties remains low.”
The UAE property market has slowed in recent years on the back of a three-year oil slump that has caused job losses, crimped purchasing power, dampened demand and subsequently pushed sales and rental prices of residential units lower. Analysts predict the market will continue to decline, at a slower rate, for much of 2018 before bottoming out later this year.
Cavendish Maxwell said average residential property prices registered a year-on-year decline of 2 per cent in the first quarter of 2018, while rents declined by up to 5 per cent in some areas.
This is in line with expectations of real estate agents, according to an accompanying sentiment survey of Dubai agents conducted by Cavendish Maxwell. The majority of respondents polled in the survey predicted a five per cent fall in apartment and villa or townhouse prices, as well as rents in the first three months of this year.
In the sales market, the was a degree of differentiation depending on the neighbourhood, the quarterly report showed. Jumeirah Beach Residence in Dubai witnessed a 2.5 per cent year-on-year decline, the sharpest fall in apartment category, while Jumeirah Islands recorded a 3 per cent drop, the steepest decline in the villa category in the the emirate.
Meanwhile, rental declines were most pronounced in Business Bay, Discovery Gardens, International City, Al Furjan Villas, the Springs and Jumeirah Golf Estates – all of which saw year-on-year declines of 5 per cent. Springs and Al Furjan villas communities saw an even bigger retreat in rental values, the report said.
Rent declines are expected to continue during the second quarter of 2018, Cavendish Maxwell said, particularly in areas with increasing supply and those located away from central business districts and public infrastructure.
"It has been a tenant-led market and increasing stock levels each quarter have provided ample opportunities for negotiation on base rents as well as payment terms such as number of cheques," the reported noted.
Approximately 3,800 residential units were handed over in Dubai during the first quarter of 2018, and, as in 2017, off-plan properties accounted for 61 per cent of total transfers, the report said.
On the plus side, the available pool of properties is catering to a wider base of buyers, Ms Dhama said.
"The average trading price for apartments during the first quarter was Dh1.2 million, and at around that price point, coupled with payment plans, more people can participate in the property market," she told The National.