Dubai rents decline by 12.5 per cent in second quarter, Cavendish Maxwell says

Challenging market conditions likely to continue in the second half

Rents continued on a downward trajectory for apartments, villas and townhouses in Abu Dhabi. Ravindranath K / The National
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Rents and sale prices continued to decline in Dubai during the second quarter of 2019 due to challenging market conditions, according to property consultancy Cavendish Maxwell.

Average apartment prices in Dubai declined 15.1 per cent in the second quarter of 2019 compared to the second quarter of 2018 with villa and town house prices fell 14.7 per cent during the same period, the report said. Apartment rents in Dubai dropped an average 12.5 per cent in the second quarter from a year ago and for villas and town houses fell 12.6 per cent.

"The first half of the year remained challenging for the UAE property sector, as rents and prices continued to decline. Conditions remain conducive for tenants who are well-positioned to demand rent-free periods, fee waivers and flexible payment terms from property owners, and potentially upscale to bigger units which may have previously been beyond their reach," said Aditi Hariharan, a senior consultant with Cavendish Maxwell. 
"Whilst we have noticed a slower rate of price declines in some areas over the last 12 months, this is still contingent on new supply and actual materialisation rates, which have averaged 40-50 per cent over the past few years," Mr Hariharan added. "The government continues to introduce measures to stimulate the market, with Abu Dhabi recently opening up investment zones to expat property buyers for the first time."

In Abu Dhabi, average sales prices slid 12.6 per cent for apartments in major investment zones, in the second quarter of 2019 from second quarter of 2018, according to the report. Villa and town house prices registered a similar average decline of 12.1 per cent over the same period. Rents too continued a downward trajectory for both apartments and villas and townhouses in Abu Dhabi. The Northern Emirates of Sharjah, Ajman and Ras Al Khaimah remain affordable alternatives for buying and renting properties in the UAE.

In the office space segment, less office space is being built in Dubai due to weak demand as well as oversupply in the market but investors continue to display interest in well-located Grade A assets, often perceived as low-risk with credit-worthy tenants, according to the survey.

Abu Dhabi also witnessed subdued demand for office space in the first half of 2019 largely as a result of reduced business growth and corporate restructuring.

In the second quarter of 2019, rents for office space in prime and mid-quality buildings in Abu Dhabi declined 2 per cent on average. Due to Dubai’s oversupply and rental climate, rents in Sharjah and neighbouring Ajman have also come under pressure.

Occupancy rates fell across retail establishments in Dubai during the first half of this year but well-located community retail facilities with established catchments continued to showcase stable performance.

In Abu Dhabi too, retail rents continued to be under pressure, with a reported increase in vacancy levels due to a slowdown in retail spending and the rise of e-commerce posing challenges.

Separately, a report from Property Finder on Tuesday said Dubai developer Emaar took the lion’s share of overall property sales in the first half of 2019 accounting for 30 per cent of total transactions with a value of Dh13.1 billion.

Other top developers in the first half of 2019 were Damac Properties, Nakheel, Dubai Properties, Azizi Developments, Seven Tides International, Danube Properties and MAG Group.

Emaar units were primarily sold in projects such as Downtown Dubai, Dubai Hills Estate, Dubai South, Dubai Creek Harbour, Dubai Harbour and Arabian Ranches 2.

Transactions cumulatively worth Dh40.3bn were registered in Dubai in the same timeframe, according to Dubai Land Department statistics.