Slide in Dubai villa prices to last into next year
December 17, 2014
Villa prices in Dubai will continue to soften into next year with the cap on mortgage lending to home buyers the biggest factor behind the slowdown, according to research from Cluttons.
“Almost a year after the introduction of the federal mortgage cap, the residential market appears to have finally succumbed to the stringent deposit requirements imposed on buyers,” the broker said in its Dubai Winter 2014 Residential Market Outlook.
In the third quarter, apartment prices inched up 0.4 per cent on average prices, but villa values decreased 1.2 per cent compared to the previous three months, Cluttons data show.
Deal activity has slowed to its lowest level in two years with the total number of freehold transactions down by almost a third during the third quarter of this year compared to a year earlier.
The number of villa transactions was 58 per cent lower than a year ago; apartment activity was down 40 per cent.
In August, property brokers warned that villa prices in Dubai could be starting to fall as new mortgage caps subdued the market for multimillion dirham homes and as hundreds of new family houses were built across the city.
At the end of October last year, the Central Bank restricted home loans to 60 to 80 per cent of a property’s value. Mortgage lending for pre-construction properties was capped at 50 per cent. For homes worth more than Dh5 million, first-time buyer expatriates can borrow up to 65 per cent of the property’s value, while for UAE nationals the cap is set at 70 per cent.
According to the broker, last year’s growth rates have proved to be unsustainable, and the sector is now entering a period of more measured and sustainable expansion.
“We expect the gradual softening in values to persist over the next three to six months while the market adjusts to the evolving conditions.”
The rate of house price growth dipped 0.3 per cent during the third quarter of this year, marking the first decline since the first quarter of 2011, Cluttons said. Average values are still up 10 per cent on the third quarter last year at Dh1,493 per square foot.
On Tuesday, CBRE said property prices increased 18 per cent in Dubai this year, down from 30 per cent last year.
The company said that more than 20,000 new homes are expected to enter the market during the course of the next 12 months which “could have a deflationary impact on sales and rental rates”.
business@thenational.ae
Follow The National’s Business section on Twitter
Published: December 17, 2014 04:00 AM
